We Are Now Witnessing the Transition from a Sellers Market to a Balanced Market  

The often heard complaint from homebuyers and their agents during the pandemic was the lack of active listings, which was not due to a lack of new listings but rather the result of those new listings going under contract so quickly that at any given time there were few to choose from.

It became a crazy sellers market which is only now abating except for “special” homes that are priced appropriately.

Looking only at closed listings, you might conclude that we are still in a sellers market. One measure I have used in the past is the median ratio of listing price to closing price, which remains above 100% within the Denver metro area. In September, for closings within 15 miles of downtown Denver, the median was 0.9% above listing price — declining, but still impressive.

However, if you look below the surface — that is, at the homes that haven’t sold, you see a rising inventory of homes that have been active on the MLS for an increasing length of time.

For example, as I write this column on Monday morning for this Thursday’s newspapers, there are 2,542 active listings of single family homes, condos and townhomes within 18 miles of downtown Denver, 760 of which (or 30%) were only listed on REcolorado in the last 7 days.

Despite so many new listings, the median active listing has been on the MLS for 19 days, and 1,024 of them (or 49.9%) have been active 30 days or longer. Another 552 of them (or 21.7%) have been active for 60 days or longer.

Meanwhile, there are 4,949 pending listings within that same 18-mile radius. Of them, only 804 or 16.2% were active more than 30 days before going under contract, and only 319 (or 6.4%) took over 60 days to go under contract. 221 of those currently pending listings went under contract with zero days on the MLS. Another 2,528 of them (over 50%) went under contract in 1 to 7 days.

Meanwhile, if you look at the 3,509 listings in the same 18-mile radius that closed in the last 30 days, only 401 of them (or 11.4%) took over 30 days to go under contract, and only 318 (or 3.4%) took over 60 days to go under contract.

This is what it looks like as we transition from a seller’s market to a balanced market. To reiterate, nearly 22% of active listings within 18 miles of downtown Denver have been on the market over 60 days, but only 3.4% of recently closed listings were active that long before going on the market.

My bottom-line observation is: Buyers who gave up after losing multiple bidding wars will find greater success if they re-enter the market now. As I’ve suggested in the past, you can avoid a bidding war simply by asking your agent to send only listings that have been active on the MLS for at least 10 days. You’re less likely to have competing buyers for them.

The new listings, however, will still get multiple offers if they are unique or special in one way or another.

For example, we recently listed a home in Golden’s coveted 12th Street Historic District. There was a bidding war on it, and it went under contract for more than $100,000 over the listing price. But if you look at all the active listings in Golden proper as I write this, there is only one new listing. The other active listings have been on the MLS between 11 and 102 days, and all but two of them have posted price reductions.

It should begin to sink in among sellers and their listing agents that they need to be less aggressive in pricing their homes when they put them on the market.

Don’t assume that buyers will flock to your listing regardless of price and compete with each other for it. Price it right, and it will sell. Overprice it, and it won’t.

Now That the Summer Months Are Behind Us, How’s the Market Shaping Up for Fall?

It has been a wild ride so far in 2021 — and the ride may be slowing, but it is definitely not over.

Below is a chart with some key statistics that I garnered from our MLS, REcolorado.com, for the 13 months ending August 2021, a timespan that allows us to compare this August with last August as well as the months since.

In creating the chart, I limited myself to listings within 15 miles of downtown Denver. That includes the entire metro area except for the city of Boulder.

The headings are pretty self-explanatory except for the last three columns. “Ratio” is the ratio of closed price to listing price at the time of sale, which might, in the case of older listings, be less than the original listing price. “Med. DOM” stands for median days that the listing was “active” on the MLS.  Half the listings went under contract in that number of days or less, and half of them went under contract in that number of days or more. “Ave. DOM” stands for average days that listings were active on the MLS, and it’s always higher than median days on the MLS because many listings are overpriced and linger on the market before the price is lowered and the home goes under contract.

There are some numbers that are worth noting, but there are some numbers that are downright remarkable.  We all know, for example, that the inventory of active listings is very low, but it’s notable that it is more than 40% lower this August than it was in August 2020. The number of sold listings is also lower by over 4% and the number of new listings is lower by 13%.

However, it’s also notable that the number of listings that expired without selling has plunged by over 43% from a year ago. More hard-to-sell and overpriced homes are selling before expiring.

Lastly, it is notable that the median days before a listing goes under contract has barely risen, and that figure has been under 7 days now for over a year.

Those statistics are notable, but there are two statistics that are remarkable. The first one is the ratio of sold price to listing price, which remains above 100% at 101.4%, although down from June’s high of 104.6%. This is remarkable because it was only this February that the number rose above 100% for the first time, signaling the height of the bidding wars. The August figure indicates that many bidding wars are still happening — due in part, of course, to the limited inventory of active listings — but they are not as numerous or extreme overall.

I emphasize “overall” because bidding wars are still getting extreme in isolated instances where the home is outstanding in some way or is in a highly desirable area with little or no competing listings. We are still seeing some homes sell for 40 to even 50% over their asking prices here and there. That includes in my home town of Golden.

So what, you may be asking, is the outlook for the fall and winter months?

If there is any seasonality left in the real estate business, it is that there are fewer new listings in the winter. You can see that was true last winter, with the low point being December. This makes sense, because few people want to put their home on the market during the holidays. That, however, only serves to keep the inventory of active listings even lower than during the summer time, yet the buying of homes continues year-round, with roughly as many closings happening in December as in November. Notice, in fact, that December was the only month in the last 13 where the number of sold listings exceeded both the number of active listings and new listings.

We should stop thinking of spring and summer as the selling season, but rather as the listing season. Most sellers believe it’s the selling season, when in fact homes sell year round. In fact, winter could be the best time to put your home on the market because there are just as many buyers getting those MLS alerts that I wrote about last week, but there are fewer homes for them to look at. 

If you want to sell your home before next spring, you should not wait until next spring to put it on the market — but do take some nice exterior photos of your home now that can be used in the marketing of your home over the winter.

Mortgage rates could start to ease upward in the coming months, but that will only increase the market frenzy as buyers try to get ahead of further increases in interest rates. No one in the industry, however, is projecting a major increase in interest rates over the next 12 months.

Is the Real Estate Market Slowing, or Isn’t It? Here Are Some Useful Statistics.

Last week I did my regular update on the state of the bidding wars, but it left me unsatisfied because I knew that the market was slowing, yet the bidding wars seemed just as real, especially in the under-$500,000 price range.

The problem with my analysis was that I only looked at the homes which sold in 1 to 6 days because those are the listings which likely had bidding wars.

This week, I looked at the bigger picture but still limiting my analysis to residential listings on REcolorado that are within 15 miles of downtown Denver.

A chart containing some key statistics over the last 11 months is shown below. Here are my observations, which you can follow by looking at the chart’s columns from left to right.

First, it’s clear that the bidding wars started in earnest in February, when the ratio of closing price to listing price went above 100% for the first time. That ratio peaked in June and fell significantly in July, but is still far above 100%.

The number of active listings is still unseasonably low, but higher than it has been since last November. The number of listings under contract (pending) is lower than it was in May and June, but still higher than any of the other months on the chart.

The number of July closings is probably a bit higher than shown in the chart since I did this analysis on August 1st, and not all July closings had been reported, but it is clearly lower than June’s number, while higher than any other month since last October.

The number of new listings in July was higher than any other month except June, which reinforces what I’ve said for months, namely that the lack of inventory is not due to sellers keeping their homes off the market. Rather, homes sell so quickly that the number of active listings remains low.

The median days active in the MLS (DIM) has not risen, but the drop in average days in the MLS is very telling. The drop to 10 days is stunning and shows that even the homes that don’t sell immediately are selling faster than ever. Last July the number was 21 and in July 2019 the number was 23. In the past five years the average days in the MLS never fell below 16 until this April.

The last column shows that the inventory (in months) of homes for sale hasn’t been above one month since January, although it is the highest it has been since February.

The bottom line, then, is that, yes, the market is slowing but is still crazy hot. The trend, if there is one, is toward a gradual easing of the seller’s market in the Denver metro area, but it is well short of becoming a “balanced” market.

Will the end of the eviction moratorium have a big effect on the market?  My guess is that it may increase the number of new listings as landlords, especially small landlords, decide to sell rather than replace their evicted tenants. The opportunity to cash in on their properties’ increased value may be too much for some to resist, and the risk of continued lost income too great for some landlords.

There will not, I believe, be an increase in foreclosures or short sales, because very few property owners are likely to owe more than their property is worth. Because of that, they will simply sell.

Bidding Wars Are Slowing — for Higher Priced Homes

This is my regular update on the real estate bidding wars. This week I chose to analyze the closings that occurred last Thursday, July 22nd, to see how the bidding wars have evolved over the past few weeks. As before, the source for this monthly analysis is REcolorado.com.

As I did in previous months, I limited my analysis to sales within a 15-mile radius of downtown Denver. I limited my search to listings that were active on our MLS at least one day and not more than 6 days before going under contract. Those are the homes that likely had bidding wars.

On July 22nd there were 36 closings up to $500,000, compared to 55 closings on June 28th. The median home sold for 6.3% over its asking price, compared to 5.4% on June 28th. The highest ratio this time was 18.5% for a home in SW Denver, compared to 20.8% on June 28th for a townhome in Littleton. Three listings sold for the asking price, and three sold for less than listing price, compared to four and six respectively on June 28th.

There were 48 homes that closed on July 22nd for more than $500,000, compared to 53 homes on June 28th. The median home in that group sold for 3.2% over its listing price, compared to 8.7% on June 28th. Only six sold for the listing price, and six sold for less than the listing price. The highest overbid in this group was 18% for a home north of Denver’s City Park, compared to 32% on June 28th.

To have a statistically significant number of closings over $1 million, I analyzed the 87 such closings that occurred from July 12 to 26. The median closing for those high-end homes was 5.4% over listing price, compared to 6.6% from late June. Nine homes sold for the listing price and 8 homes sold for less than the listing price, compared to 12 and 6 respectively in late June. The highest overbid was 24.8% for a bungalow in the Hilltop neighborhood, which was listed at $950,000 and sold in three days for $1,186,000. Of those 87 homes, 24 were listed under $1 million. Last month four million-dollar homes sold for more than 30% over their listing price.

Real Estate Bidding Wars Are Not Abating

This is my monthly update on the real estate bidding wars. This week I chose to analyze the closings that occurred last Thursday, June 10th, to see how the bidding wars have evolved over the past four weeks. The source for this monthly analysis is REcolorado.com, the Denver MLS.

As I did in previous months, I limited my analysis to sales within a 15-mile radius of downtown Denver. I limited my search to homes, condos and townhouses that were on the MLS at least one day and not more than 6 days before going under contract. Those are the homes with bidding wars. I divided the results into homes which sold up to $500,000 and those that sold for more.

As you can see in this chart, the bidding wars only took off in earnest during February 2021, and they have kept accelerating month by month, enough that it raised the average ratio of closing price to listing price over all sales, not just the homes which sold in six days or less.

On June 10th there were 40 closings up to $500,000, compared to 44 closings on May 13th. The median home sold for 6.2% over its asking price, compared to 8.7% on May 13th. The highest ratio this time was 19.6% for a condo in Golden compared to 15.7% on May 13th for a home in southwest Denver. Only one listing sold for the asking price, and only two sold for less than listing price.

There were 37 homes that closed on June 10th for more than $500,000, compared to 56 homes on May 13th. The median home in that group sold for 7.7% over its listing price, compared to 8.1% on May 13th. Only three sold for the listing price, and none sold for less than the listing price. The highest overbid in this group was 20.9% for a one-story home in Lakewood on June 10 compared to 29.4% on May 13.

To have a statistically significant number of closings over $1 million, I analyzed the 82 such closings over a longer period — June 1-13. The median closing for those high-end homes was 6.1% over listing price, compared to 6.0% in May. Four homes sold for the listing price and 9 homes sold for less than the listing price. The highest overbid was for a 1979 ranch-style home in Jeffco’s Sixth Avenue West subdivision, which was listed at $1,080,000 and sold in 6 days for $1,575,000, 45.8% over listing price.  

I’ll repeat this analysis on July 15.

How High Are Bidding Wars Pushing Up Home Prices?

We’ve all heard some crazy examples of bidding wars in which homes have sold for way over their listing prices, so I took a snapshot of just one day’s closings, limited to a 15-mile radius of downtown Denver. That takes in an area from Broomfield to Highlands Ranch and from Golden to Aurora. It does not include the City of Boulder.

The day I chose was last Friday. The source was REcolorado.com.

I limited my search to homes, condos and townhouses that were on the MLS at least one day and no more than 6 days before going under contract. Those are the listings that experienced bidding wars. I divided the results into homes which sold up to $500,000 and those that sold for more than that.

On April 16th there were 48 closings up to $500,000. The median home sold for 4.7% over its asking price. It was a tri-level home in Aurora listed at $420,000 which sold in 3 days for $440,000. Only 3 homes sold for the listing price and 2 sold for less. The highest ratio was 25.8% for a home in Aurora that sold in 1 day.

There were 68 homes that closed on April 16th for more than $500,000. The median home in that group sold for 8.3% over its listing price.  It was a 1950 ranch in Denver’s North Hilltop neighborhood listed for $600,000 that sold in 3 days for $650,000. The highest overbid in this group was 18.8% for a 2-story home in Westminster listed for $425,000 that sold in 5 days for $505,000. Only 5 sold for the listing price and 4 sold for less.

To get a statistically meaningful number of closings over $1 million, I looked at 68 such closings from April 1-16. The median ratio was 4.3% over listing price. The highest was for a 1954 bungalow in Denver which was listed at $965,000 and sold for $1,205,000, 24.9% over listing.

Note: These statistics reflect the bidding wars that were taking place during late March, when most of these listings went under contract. Today’s bidding wars appear to be even more intense. Stay tuned!

As Winter Approaches and Covid-19 Lingers, What’s the Denver Real Estate Outlook?

As I write this, the real estate market is a tale of two cities — or, more accurately, a tale of cities vs. suburbs. Because of the virus, Americans are “getting out of Dodge,” leaving the congestion of multi-story buildings and moving to the suburbs and the countryside.

The statistics tell the story. In a recent 30-day period, 46% of the sales in Jefferson County closed above their listing price after being on the MLS for a median of 5 days. It was quite the opposite in downtown Denver. There, during the same 30-day period, 87% of the listings (primarily condos in elevator buildings) sold below their listing prices with a median time on the MLS of 24 days.

It’s the same story nationwide, and for good reason. People are fearful of catching Covid-19, and they know that being in close quarters can’t be good. In the suburbs they can take their dog for a walk without using an elevator and without having to come within 6 feet of another human being.  (I’m describing my own life here — I walk my dog Chloe every morning on a one-mile circuit around my subdivision and never come in close contact with the neighbors I encounter. Because of that, I don’t even need to wear a mask on these walks.)

We keep hearing that the inventory of homes for sale is at record low (except downtown), but that’s only true because homes are going under contract so quickly. The chart below, generated on REcolorado.com, tells the story well.

Using the most recent full-month MLS statistics for Jefferson county (September 2020), you can see that we actually had more new listings this September than in any of the five previous Septembers, yet the number of sold listings was nearly the same, so there was no way the number of active listings was going to increase and was, in fact, lower by far than the number of active listings in the five previous Septembers. The median time on the MLS of 5 days tells you why.

Moreover, the average ratio of sold price to listing price in Jeffco was 100%, as it had been every prior September except in 2019, and the price per finished square foot has continued to soar. The situation is similar in all suburban counties.

Clearly, the takeaway from this analysis is that if a homeowner is thinking of selling their home anytime soon, he or she would be smart to put their home on the market right now. Don’t think that just because winter is coming that buyers aren’t actively looking for homes. Last week in this column I promoted a 1973 ranch in Arvada that was “not particularly updated.”  It didn’t even have a garage door opener for its one-car garage, and it had a backyard clothes line instead of a dryer. Yet that home attracted over 50 agent showings in 72 hours and 11 offers by Saturday evening, when it went under contract for $30,500 over its listing price.

A recent real estate industry article predicted a terrible winter for us real estate agents because of low inventory, but there are just as many homes for sale as ever — maybe more.  You just have to act quickly because they are selling right away. 

Another recent listing of mine also illustrates how hot the market is. The very first offer for my $530,000 tri-level listing in central Lakewood came in at $585,000, apparently from a buyer who had lost out in previous bidding wars and didn’t want that to happen again. The strategy worked, because no other agents would submit an offer when they learned that we had one that was $55,000 over full price.

Are you wondering what you might be able to get for your home?  It costs you nothing to get a comparative market analysis from a real estate agent, and, regardless of where your home is, my broker associates and I are happy to provide that for you.  Call us!

Report Names 7 Cities Most at Risk of a Housing Crash. Denver Isn’t One of Them

With the crazy seller’s market we’re experiencing now, it’s common for people to ask whether we’re in a “bubble” which could burst at any time.

Well, last Wednesday UBS Group released its annual Real Estate Bubble Index, and while it listed three U.S. cities (San Francisco, Los Angeles and New York) as “overvalued,” none of the seven cities listed as “bubble risks” were in the U.S.

Those seven cities with the highest “bubble risk” included Toronto (#3) and Hong Kong (#4), but the rest were all in Europe — Munich (#1), Frankfurt (#2), Paris (#5), Amsterdam (#6), and Zurich (#7).

Boston squeaked into the “Fair Valued” category, and Chicago narrowly made it into the “Undervalued” category.

I was surprised at this analysis until I read the UBS report myself instead of just the coverage of it on a real estate news service to which I subscribe.

The answer as to why more American cities weren’t on the list turns out to be very simple — UBS Group only studies “25 major cities around the world,” and the U.S. cities I mentioned above are the only U.S. cities analyzed each year in the report!  Twelve of the 25 cities studied for this report are in Europe, with the rest divided between North America, the Middle East and Asia/Australia.  It should be noted that the UBS Group office which creates the report is based in Switzerland, so it’s rather Euro-centric.

Click here to view the full UBS Group Global Real Estate Bubble Index.

Despite the limited number of U.S. cities included in the UBS report, there are some useful observations about our market, such as this one:

“Overall, the drop of mortgage rates to historically low levels supports house prices in the U.S. But price changes in the analyzed cities trail the nationwide average. Inner-city demand growth has slowed down as citizens move out to the suburbs as a result of affordability issues and the impacts of COVID-19. Continued migration to lower-cost and more tax-, business-, and regulatory-friendly states has accelerated this trend.”

Claudio Saputelli, Head of Real Estate at UBS Global Wealth Management’s Chief Investment Office, added the following: “The rise of the home office calls into question the need to live close to city centers. Pressure on household incomes cause many people to move to more affordable suburban areas. Moreover, already debt-ridden or economically weaker cities will have to respond to this economic crisis with tax increases or public spending cuts, neither of which bode well for property prices. Taken together, these factors amplify some longer-term uncertainties surrounding urban housing demand.”

Doing my own statistical analysis on REcolorado, Denver’s MLS, I see the trend described above.  While the number of active (i.e., not yet sold) listings and days on market are at nearly   all-time lows in Jefferson County, they are near all-time highs in the Lodo/Downtown Denver market. This is not a good time to sell a condo in any city center (except small cities like Golden), but it is certainly a good time to sell a single-family home (or a condo) in Jefferson County, as I have reported in previous columns.

The last time Realtor Magazine even dealt with the question of a real estate bubble was in November 2018.  The consensus of real estate economists is that our country is not in a real estate bubble, but it’s hard not to worry about it as one looks at the recently increased rate of appreciation in home prices.

With no end in sight to the low mortgage interest rates and with the rich getting richer under the Trump tax cuts, it’s understandable that the real estate market is performing as it is, but such appreciation cannot be sustained long-term.

Only time will tell, and our crystal balls will at least clear up a little after the current election season ends. A Biden victory is sure to bring rollbacks of the Trump tax cuts which benefited the rich (defined as those having taxable incomes over $400,000 per year) and the super rich, which will reduce some of the upward pressure on home prices, but those rollbacks are critical to address the widening wealth gap in America and the exploding national deficit — something that used to be an important issue among Republicans!

Experts Are Predicting a Surge in Foreclosures, But I See the Situation Differently

With the continued high unemployment rate and the expiration of Pandemic Unemployment Assistance (PUA), many homeowners are hurting, so it makes sense that we may have a foreclosure crisis in our future.

CoreLogic reported recently that back in June (when the Feds were still sending $600/week in PUA to Americans) the share of mortgages with payments 90 to 119 days late had already risen to 2.3%, “the highest level in 21 years.” A rate that high could result in a foreclosure crisis, the report said. Not only could millions of families potentially lose their home, but that would also create downward pressure on home prices.

But I see the situation differently, and after consulting with Jaxzann Riggs of The Mortgage Network, here’s why I don’t expect that flood of foreclosures.

First of all, foreclosure should only happen when a seller owes more on their home than it is worth. That’s because sellers lose all their accumulated equity in a foreclosure, and most people have accumulated a lot of equity thanks for the sellers’ market we have been experiencing.

Secondly, federally mandated forbearance is in effect, which is unlike the forbearance which delinquent borrowers may have enjoyed in the past. Under the current plan, lenders add extra payments at the end of the loan instead of requiring any kind of catch-up payments. This mandate could be extended, too.

The only people likely to face foreclosure will be those who recently took out 100% VA loans or 96.5% FHA loans or conventional loans with only 3% down payment, and for whom there is hardly any equity to lose in a foreclosure action.

Being on forbearance doesn’t affect one’s credit rating even though you are not making payments (again, part of the federal mandate), but once you resume payments, you need to make a minimum of three on-time payments to qualify for a Fannie Mae or Freddie Mac loan, which will restrict your ability to sell your home and purchase a replacement home. Some lenders require six months post-forbearance loan payments.

That, too, will slow down any surge in what are known as “distressed listings.”

Despite Global Pandemic, Our Real Estate Market Was the Hottest Ever for August

Much to the consternation of observers, the real estate market in metro Denver was hotter this August than it was in any previous August, according to the Market Trends Committee of the Denver Metro Association of Realtors (DMAR). At this rate, 2020’s statistics at year end will likely exceed 2019’s statistics.

The report covers an expanded metro area, including 11 counties instead of the 7 urban and suburban counties that you and I think of as “metro Denver.” The non-urban counties included in the report are Clear Creek, Gilpin, Elbert and Park.

Detached single-family homes sold like crazy in August—up over 6% from August 2019, despite 50% fewer active listings at month’s end. The average sold price was up 13.8% from last year, and average days on market was down 23%.

Attached homes sold on a par with last year, although their inventory was also down — 19% fewer listings at month’s end. They did sell quicker, though, with days on market down by over 27%.

Unlike DMAR, I like to define the metro Denver market as within a 25-mile radius of the state capitol, as shown here, instead of by county. Using that method, the number of detached homes sold this August was up 13.7% from August 2019, and the sold price per finished square foot (my preferred metric) was up 7.0%. Average days on market dropped by 31%, but median days on market plunged 57% from 14 days in August 2019 to 6 days this year.

Even more interesting to me is that median days on market was in double digits until March 2020 — the first month of Covid-19 lockdown — when it dropped by 40% to 6 days, and remained in the 5- to 7-day range through August. It could be said that “Stay at Home” and “Safer at Home” really meant “Buy a Home” in the real estate business!

Average sold price within that  25-mile radius rose by 13.4% to $597,290, while median sold price rose by 11.6% to $505,000. The gap between average and median is attributable to a large number of million and multi-million dollar closings. I wish others would stop focusing on average stats for that reason.

The number of active listings (what we call “inventory”) plummeted from 6,483 in August 2019 to 3,444 in August 2020, a 47% decline.

Another measure of market strength is how many listings expire without selling. That number was 777 in August 2019, but it fell by 37% to 493 this year.

The average ratio of sold price to listing price was 100% both last August and this August — suggesting that roughly half the listings sold above full price. With half the homes selling in 6 days or less, it’s to be expected that there were multiple offers and possibly a bidding war on many listings.

This week my downtown Golden fixer-upper closed at $665,000, which was $40,000 over listing price. My Lakewood listing from last week is already under contract at $55,000 over full price. Clearly, the seller’s market is still hot despite the pandemic.

If you have considered selling your home, there couldn’t be a better time than now to put your home on the market. And you couldn’t do better than call one of us listed below to talk about it. Your home would, of course, be featured in my weekly Denver Post column and on this blog.

If you let us represent you in the purchase of your replacement home, the listing commission could be as low as 3.6% and qualify you for totally free moving!

Jim Smith— 303-525-1851

Jim Swanson — 303-929-2727

Carrie Lovingier — 303-907-1278

Chuck Brown — 303-885-7855

David Dlugasch — 303-908-4835

Carol Milan — 720-982-4941