Tag: Real Estate Market

NAR Economist Lawrence Yun Says ‘The Housing Recession Is Over’

In a July 27th article on realtor.com, the National Association of Realtors’ chief economist, Lawrence Yun, was quoted as saying, “The recovery has not taken place, but the housing recession is over. The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply.”

“The West—the country’s most expensive region—will see reduced prices, while the more affordable Midwest region is likely to see a small positive increase,” Yun was quoted as saying in the article.

Yun’s analysis was based on June statistics, but I can see some evidence of his statement in my own experience. My newest listing in Lakewood, featured last week for $700,000, went under contract in three days amid competing offers for $720,000, leading to cancelation of the open house scheduled for day 4.

Another listing, a $1,250,000 ranch in north Golden, also went under contract last week for just below its listing price.

The fact remains that the increase in mortgage interest rates has many sellers holding onto their current home even though they’d like to move. If you had a 2.9% mortgage on your current home, you’d want to stay put rather than give it up and buy a replacement home with a 7% mortgage, right? The industry refers to homeowners in that situation as “rate-locked.”

Builders of new homes are benefiting from the low inventory of existing homes for sale. The sale of new homes surged in May and declined in June, but the trend is still upward. Buyers like buying a new home because, in addition to being new, they can usually be purchased without a bidding war.

Yun, of course, is quoting national statistics, but you and I know that all real estate is local, so I created the chart below using the tools available to me on REcolorado, Denver’s MLS, looking only at listings within 18 miles of downtown Denver.

Current inventory compares favorably with previous years in that chart, although pending and closed sales are down significantly. Values are still high, with the price per finished square foot near last July’s high.

Forecasters, me included, were surprised at the strength of the current real estate market.  We thought a true recession was in the cards, but in fact the market remains quite strong. I can only attribute the market’s performance to the large number of buyers still in the market and the continued low unemployment rate.

What will the market be like as we move into fall and winter?  Stay tuned, because I don’t want to venture a guess!

July Real Estate Market Analysis

Denver’s real estate market has undergone notable shifts this year when compared to past averages. Typically, around 8,757 active homes are on the market in July. However, this year, the number of homes for sale was under 6,000. 

High interest rates reduce the motivation for homeowners to sell, even if downsizing to a smaller property. Buyers face the same challenges due to higher interest rates. Many have postponed their real estate plans, waiting for lower rates.

The result is fewer transactions. This pattern is expected to continue through 2023. It resembles market activity from 2013 to 2019, with one notable deviation. This year, we’re observing more frequent and larger price reductions in both size and number of properties. These dynamics are shaping the landscape for both buyers and sellers, prompting strategic decisions in the face of evolving market conditions.

Megan Aller of First American Title contributed to this report.

What Are Some of the Common Mistakes That Homeowners Make When Selling?

I received an editorial submission on this topic, and it’s a good one, but I have my own points to make. The subheads below are his, but the paragraphs are mine.

Overpricing Your Home: We all make this mistake at times. The important thing is to take quick action. You know it’s overpriced when there are few or no showings and no offers. Don’t wait—reduce the price immediately or risk it becoming “stale.”

Neglecting Necessary Repairs: But what’s necessary? A furnace at the end of its expected life may be needed, but it’s not going to generate more showings or offers. Leave it as an issue to be brought up at inspection. Call it “lipstick on a pig” if you want, but I favor spending money on making your home more appealing visually to buyers, starting with your lawn care/landscaping and the exterior look of your home.

I focus on what I call “eyesores”: things that draw negative attention from a visitor to your home — carpet stains or noticeable wear; hardwood that badly needs refinishing; damaged countertops, peeling paint, etc. Note: the further the eyesore is from the front door, the less serious it is. The buyer has already fallen in or out of love with your house by the time he or she notices the shag carpeting in the basement bedroom. They are not going to change their minds by then.

Poor Home Staging / Presentation: I provide a free home staging consultation because this is so important. Decluttering and thinning your possessions is the one improvement that costs almost nothing. If you don’t want to do this, I’ll refer you to another Realtor and get a referral fee! I want my sellers to appreciate the importance of “looking good.”

Mistakes in Marketing/Listing: This is why you should use Golden Real Estate! We don’t skimp on marketing, as you have probably noticed. We do only magazine quality HDR photos using a professional photographer. We do narrated video tours with drone footage. Our “for sale” signs are classy and have solar powered lights. (And we make sure our signs are vertical.) We purchase a website URL for every listing. And we do all this whether it’s an inexpensive condo or a multi-million dollar home. Oh, yes, we also have a full-page weekly newspaper ad in the Denver Post plus three weekly newspapers which puts our listings in front of over 200,000 people who still read! (That’s a great demographic, but millennials are becoming an important demographic too, and we reach them through the blog posts and social media presentation of every article and listing that appears in our full-page ads.)

One piece of marketing that costs the agent only time, not money, is to complete ALL MLS data fields, not just the mandatory ones. Some of those optional fields, such as descriptions of each room, add a great deal of information for buyers. We complete those optional fields.

Ignoring Local Market Trends: We are currently in a “balanced” real estate market. The “seller’s market” of last year is over, but some sellers and their agents price their homes at a wished-for price that isn’t reflective of the slower market that we are now in.  I like how Megan Aller of First American Title puts it in her market presentations: “Sellers think it’s 2020 and buyers think it’s 2008.” 

Above all, remember that all real estate is local — it can be rising in one neighborhood and falling in another. And real estate is also emotional; sellers and buyers don’t always act rationally in the decisions they make about their home. Personally, I utilize three different valuation models when creating a market analysis for a prospective listing. 

Keep in mind the mortgage market, not just the real estate market. Yes, the interest rates are high right now, and no one can accurately predict when they will be lower. But there are programs for first-time homebuyers (defined, by the way, as someone who hasn’t owned for three years), for first responders, teachers and others. And there are ways to buy down the interest rate for one or two years in hopes of refinancing when rates are lower. If you don’t have a knowledgeable and hard-working loan office on your side, we have a couple we can recommend.

Metro Real Estate Market Exhibits Seasonal Cooling

Starting this month, I am partnering with Megan Aller of First American Title, in providing a statistical analysis of the prior month’s real estate activity in the Denver metro area. Megan is renowned for her diligent and in-depth analysis of the market, so, while this is under my byline, I am really conveying what she has told me.

As the Denver market enters a cooler season, the landscape is undergoing a notable shift with rising inventory and falling demand. This phenomenon, known as retraction, is causing a seasonal decline in prices as the balance between supply and demand evolves.

Recent data reveals a decline in the occurrence of multiple offers. For detached single-family homes, the percentage of properties selling for over asking price dropped by 4.7%, settling at 41.1%. Similarly, attached residences experienced a 2.0% decrease, with 37.4% of homes selling for over asking price.

While attached single-family home prices experienced a minor dip of 0.1%, averaging $480,656, detached single-family home prices rose by 1.7% month over month, reaching an average price of $796,702.

Both attached and detached homes currently have a supply of 1.3 months, indicating limited inventory. However, experts predict supply will likely increase in the coming months.

The shift towards a cooler market creates a favorable environment for prospective buyers. With a decrease in multiple offers and the potential for price adjustments, buyers have an opportunity to make their move in a less competitive market. Whether they are first-time homebuyers or looking to upgrade, the current market conditions present an opening for strategic decision-making.

If you’re interested in learning more about the metro Denver real estate market, my broker associates and I can provide valuable insights tailored to your specific needs. Our contact information is below.

The data in this report covers the following metro area counties: Adams, Arapahoe, Broomfield, Denver, Douglas, Elbert and Jefferson. This representation is based in whole or in part on content supplied by Metrolist Inc., d/b/a REcolorado. REcolorado does not guarantee nor is it in any way responsible for its accuracy. Data from REcolorado may not reflect all real estate activity in the market. All data above is for the month of June 2023.

It’s Still a Seller’s Market in Metro Denver – If Homes Are Priced Right

Here’s this week’s report on the real estate market in the Denver Metro Area.  Unlike others, I define the metro area geographically, not by county — as an 18-mile radius of Downtown Denver (see map), which includes Lone Tree but not Parker or Castle Pines to the South and Superior and Louisville but not the City of Boulder to the North.  To the west it goes to El Rancho, but not Evergreen, and to the east it goes to DIA but not Watkins.

In that area, there are currently 4,210 active listings with a median Days on MLS (DOM) of 28.  Only 830 of them are 7 days or less, which is the median DOM of the listings that closed in the last 7 days. Two-thirds of the active listings have been active over 14 days, and over 11% of the listings have been active over 120 days!  In short, we have a HUGE surplus of over-priced active listings.  (If you want to make a lowball offer, ask me or your agent to show you only listings that have been active over a month!)

Of the nearly 4,000 listings currently under contract within 18 miles of downtown Denver, the median days before going under contract was 9.  Of the listings that closed in last 7 days, the median days on the MLS was 7.  What does that say about the 80% of currently active listings that have been on the MLS over 7 days.  Not good!

There has been a big shift in Median Days on MLS this spring. Until last August, the median DOM had been under 10 throughout the pandemic, but between August 2022 and Feb. 2023, it ranged from 10 to 32 median days on the MLS.  But, surprise! Starting in March of this year, the median DOM is again under 10.  Happy days are here again — IF the home is priced right!

Take Advantage of Our Free MLS Neighborhood Alerts

We have two tools for making you a market expert in your neighborhood. First  we can send you a Neighborhood Market Analysis. Second, we can set you up to receive an MLS Email Alert when a home in your neighborhood is coming soon, active, goes under contract, or closes. Send your request to Jim@GoldenRealEstate.com.

Preparing for the Biennial Property Tax Process

Nobody likes taxes, but our Colorado property tax system is, in my opinion, among the fairest in the nation, so as we brace ourselves for the “Notice of Valuation” we’ll receive from our county assessor next month, I thought it useful to describe how it works and why I believe it to be relatively fair.

A 2022 post on the website Investopedia.com ranked Colorado as having the 5th “best” (i.e., lowest) property tax in the nation, behind Hawaii, Alabama, Louisiana and Wyoming. It calculated that the state’s “effective property tax rate” was 0.51% of a home’s valuation. Hawaii was lowest at 0.31% and New Jersey was highest at 2.31%.

However, that statewide average does not include the impact of metropolitan tax districts, which can nearly double the tax rate on a given home.  (This is a huge scandal which is only recently beginning to get the attention of legislators, who could, if they wanted, rein in metro district abuses.)

Putting aside that scandal for a moment, let me describe how property taxes are calculated in Colorado, as mandated by Colorado’s constitution.

The essence of the system is to have the county assessor determine the fair market value — that is, what every property could have sold for based on what comparable homes sold for — on June 30th of every even numbered year. That means that the valuation you receive in the mail next month will be what the county assessor, guided by mass appraisal software, estimates your home might have sold for on June 30, 2022.

That’s an unfortunate date this time around, because June 2022 may well have marked the peak of the Covid-19 era run-up of home prices in Colorado and nationwide.

An important note: Although the valuation date is June 30th of last year, it applies to what your house looked like on January 1st of this tax year. That made a big difference for victims of the Marshall Fire, because their home was worth next to nothing on Jan. 1, 2022, so the tax bill they received this year which covered 2022 should have been based solely on land value, not a repeat of their 2021 tax bill. If the fire had not destroyed their home on Dec. 30, 2021, the valuation of it from June 30, 2020, would have applied to property taxes for both 2021 and 2022.

Getting back to the process, once the valuation on your home is finalized following any appeal you might make, your tax for this year and next will be determined by applying your home’s mill levy to the assessed valuation, which is now 6.765% of your home’s full valuation.

I’ll use an example a home with a full valuation of $1,000,000. First of all, that figure is reduced by $15,000 under a law passed last year, so the assessment rate is applied to $985,000. Applying the above assessment rate, it would have an assessed value of $66,635, so if your mill levy is 100, then your tax bill would be $6,663.50. (It’s called a mill levy from the Latin word for thousand, so the levy is applied to every thousand dollars of assessed value. Thus, 100 x 66.635 = $6,663.50.

Keep in mind when you appeal your valuation that every $10,000 in reduced full valuation is worth only $676.50 in reduced assessed valuation. At a mill levy of 100, a full value reduction of that amount reduces your tax bill by only $67.65. That may not be worth arguing for, but a reduction in full valuation of $100,000 would be worth $676.50. And if you’re in a metropolitan tax district with a high mill levy, it’s worth even more.

Expect more on this topic from me in the coming weeks.

Sellers Are Helping Buyers to Buy Down High Interest Rate Mortgages

With interest rates staying between 6 and 7 percent, it has become a common practice for buyers to demand and sellers to grant a concession by which the seller pays a fee to the buyer’s lender to get a lower interest rate for the first year or two, after which the buyer can hopefully refinance at a lower rate.

To see how pervasive this trend has become, I compared the statistics on Denver metro area closings over the past 90 days versus before interest rates began rising last year.

During the 90 days prior to this Monday, there were 4,512 closings of residential listings on REcolorado.com in which it was reported that the seller had provided a concession related to buyer’s closing costs. During the first 90 days of 2022, that number was only 2,675.

February Statistics Show Some Stabilization of Metro Denver’s Real Estate Statistics

Below is the “Market Overview” for February as published by the Market Trends Committee of the Denver Metro Association of Realtors (DMAR). It is for the 11-county “metro” area, which includes Elbert, Gilpin and Park counties.

One statistic omitted from the DMAR infographic is the median days in MLS, which fell dramatically compared to the average days in MLS. Defining metro Denver as a 23-mile radius of downtown Denver (not how DMAR chooses to define it), I find the average days-in-MLS for February to be 47 (up from 46 days in January) and the median days-in-MLS to be 24 (down from 34 days from January).

(Notably, the days-in-MLS statistics for the first several days of March are 39 and 13 respectively. We’ll check back in April to see how those statistics for March end up.)

That’s an important distinction, because what it tells us is that while there continue to be lots of overpriced homes sitting on the MLS, there are now enough right-priced homes on the MLS which are selling quickly to bring down the median days-on-MLS statistic.

This is a lesson which all sellers should take to heart — that if you price your home at or slightly below the market, you will sell your home quickly, but if you put it on the MLS at a hoped-for price that is above the market, it will sit on the MLS for a long time.

As I write this on Monday evening, these are the numbers of active Denver metro listings on www.REcolorado.com listed by days-on-market:

0-7 Days—610

8-14 Days—306

15-31 Days—478

32-60 Days—442

61-90 Days—193

Over 90 Days—743

We agents refer to listings that have been on the MLS over 30 or 60 days as “stale,” and those are good prospects for getting a low-ball offer accepted. Buyers can certainly be confident that they won’t encounter a bidding war for any listing that has been on the market more than a couple weeks — unless there was a recent price reduction. If you want to avoid bidding wars and get a good deal, ask your agent to send you only listings which have been on the MLS over 10 days.

Meanwhile, sellers need to recognize that if they overprice a home and later reduce the price to make it sell, they typically get less than if they had priced the home correctly.

For Jefferson County residents, here is the above analysis as it relates to Jeffco:

These are the numbers of active Jeffco listings on REcolorado by days-on-market:

0-7 Days—150

8-14 Days—62

15-31 Days—92

32-60 Days—82

61-90 Days—25

Over 90 Days—141

Here are the charts adapting that DMAR graphic to Jefferson County:

The Real Estate Market Is Showing Signs of Revival

Here at Golden Real Estate, we have some anecdotal evidence of a resurgence in the real estate market, which was moribund in December.

On Saturday, Jan. 7th, I held a 2-hour open house at my listing on Bates Avenue. My previous open house at that listing had drawn not a single visitor, so I was quite surprised to have ten sets of visitors that day. All of them were actual buyers, not lookie-loos.

I immediately decided to hold it open the following day, Jan. 8th, and once again it was my most visited open house in recent memory.

I had four prospective buyers from those open houses and this Monday that home went under contract.

A second example of this resurgence came when broker associate David Dlugasch listed a 1960 brick ranch with walkout basement in south Golden/Pleasantview. (It was featured in last week’s ad.) It drew 22 agent showings on the first three days, and it went under contract on Sunday at full price — $798,000, which I frankly thought was a reach.

Although anecdotal, these experiences give me hope for a continued market resurgence in 2023.