Tag: Real Estate Market

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

Realtor.com Weighs in on the Real Estate Market’s Surprising Rebound

The fact that we’re still in a seller’s market puzzles many real estate professionals, but there are reasonable explanations, which Realtor.com did a good job of describing in a July 13th article by Clare Trapasso.

The headwinds in this market are strong and numerous. We have a lingering and maybe worsening pandemic, staggering unemployment numbers, and a contentious presidential campaign, made even more contentious because of our national reckoning about systemic racism. How does one account for such a strong real estate market, and when will that market soften?

First let’s look at our local numbers. In my July 9th column, I showed statistically how the market had surged in June.  As I write this on Monday evening, there are 4,903 active listings within 20 miles of the State Capitol, but there are 7,720 listings under contract, 3,905 of which (or 50.6%) went under contract in 7 days or less.  A total of 5,219 listings closed in the last 30 days, 2,679 of which (or 51.3%) went under contract in 7 days or less and 1,895 of which (or 36.3%) sold for above full price, likely with competing offers.

So, yes, we are still in a seller’s market — but how can that be, given all that’s going on?

To quote the realtor.com article, “The housing market is back — and then some.”

Nationally, according to realtor.com, median home prices rose 6.2% year-over-year for the week ending June 27th.  According to REcolorado, the median sold price for listings within 20 miles of the State Capitol that same week was $440,000, with 49.9% of them selling in 7 days or less, compared to $418,000 for the same 7-day period a year ago, when 44.5% sold in 7 days or less. That’s a 5% increase in median price year-over-year.

To quote the realtor.com article, “Homes are selling faster than they did in 2019, when no one had heard of Covid-19. And bidding wars are back as first-time and trade-up buyers who have lost out on other homes slug it out.”

The contrast between this market and the market during the “Great Recession” of 2008 couldn’t be sharper. Back then, there was a glut of housing and few buyers. Today, the situation is reversed, with fewer listings and a glut of buyers. Because the 2008 crisis was caused by the subprime mortgage scandal, the glut of housing was made worse by a flood of foreclosures.

Quoting further from the realtor.com article, “To be sure, there are plenty of danger signs ahead in this economy, including continuing historic levels of unemployment and rising coronavirus infection rates in many parts of the country. But, for now, real estate is bouncing back much quicker than other bellwether industries. The reason: After months on hold, Americans are beginning to feel more confident about the idea of buying or selling a home.”

The article quoted a Fannie Mae survey of 1,000 participants, showing that 61% said it was a good time to buy and 41% said it was a good time to sell. And that survey was taken before mortgage rates dropped to under 3%, which happened just last week.  As a result, we can expect the real estate market to be even more supercharged in the coming weeks. Already, mortgage applications for home purchases had risen 33.2% year over year in the week ending July 3rd, according to the Mortgage Bankers Association.

Lower interest rates mean lower mortgage payments by hundreds of dollars, which instantly increases the affordability of homes, and buyers understandably believe they are smart to buy now before the rates rise again, as they surely will.

The low interest rates also make the decision to buy more compelling for renters burdened by the still high cost of renting in the Denver market.  This is particularly compelling for white-collar workers who were not furloughed or laid off during the pandemic and may have money in the bank for a down payment.

Another factor which I mentioned in my earlier column is the number of workers who started telecommuting because of the pandemic and whose employers said they could keep telecommuting even after it’s safe to return to the office. These people are in a buying mood as they look to move further from the congestion of downtown apartments or condos where going outside involves a greater risk of Covid-19 infection.  They also saved a lot of money (as Rita and I did) by eating more home cooked meals because restaurants were closed. And Netflix costs a lot less than going out to the movies or the theatre, to say nothing about the savings on popcorn made at home or purchased at the supermarket!

Yet another factor is the increase in divorces and separations resulting from forced home confinement. I was amused to note the increase in TV commercials by divorce attorneys during April and May.

New Listings and Showings Surged Last Week After Governor Eased Showing Restrictions

By JIM SMITH, Realtor(r)

Sellers who had been holding back during most of April put their homes on the market during the calendar week ending Saturday, May 2nd. And showings of listings also surged.

Listing Activity – 7 Days ending 5/6/20 within 25 miles of the Colorado State Capitol

Altogether, 1,648 homes within 25 miles of the State Capitol were listed on Denver’s MLS between Sunday, April 26th and Saturday, May 2nd. That’s pretty close to the 1,885 number entered on the MLS during the same 7-day period in 2019, and more than double the 819 homes listed two weeks earlier. (During the week of April 19th to 25th, only 993 homes were entered on the MLS.)

Of those 1,648 listings, 29 were withdrawn from the MLS by week’s end for unknown reasons, and 10 were entered as “sold” without ever being active. That still left 1,609 new active listings, 511 of which were already under contract by Tuesday noon. That’s significantly above the 405 homes that went under contract by the end of the same period last year.

By the deadline for this column at noon on Tuesday, 233 additional listings had been entered as “active” on Denver’s MLS. 

Not included in the 1,648 number are 176 listings that were entered on the MLS as “coming soon,” a status that didn’t exist until this year. One of those was my $550,000 listing at 2950 Jay St. in Wheat Ridge. It went “active” this week. Showings begin Saturday, May 9th.  There are more pix on the website.

So, while we can hardly say life is “back to normal,” the real estate business is certainly showing renewed signs of life. Frankly, I’m surprised at the size of this surge in listings and signed contracts.

Like most agents, I have many buyers who have given me their search criteria, and the MLS automatically sends them alerts of homes matching those criteria as they are entered on the MLS. In my case, I have nearly a hundred such email alerts in effect. Since Gov. Polis replaced “stay-at-home” with “safer-at-home,” which allows in-person showings to resume, I have seen a spike in the number of buyers clicking on the links for listings sent to them.  My listing at 1957 S. Taft Street in Lakewood saw five showings set on May 1st and 2nd alone.  With this week’s price reduction, I wouldn’t be surprised if it goes under contract quickly.

Listing agents are expected to take extra precautions to protect the health of both buyers and sellers under the “safer-at-home” guidelines. For example, there can be no overlapping showings, and only 3 persons (typically two buyers and their agent) are allowed in a listing at one time. Our showing service, ShowingTime, is enforcing these rules by not allowing overlapping showings to be set.

As a listing agent, it is my responsibility to sanitize a home between showings, which I do by using Clorox wipes on all hard surfaces that visitors might touch, such as door handles and light switches. I leave the lights on and most doors, including closet doors, open or ajar, so that touching them is minimized. If the home is not vacant, sellers can perform these safety functions themselves.

Buyers and their clients are asked to wear face masks and gloves and to wear booties, which they’re asked to take with them when they leave. By following these guidelines, agents and their clients can feel as safe as, or safer than, for example, at a supermarket.

What Will Be the Short- and Long-Term Effects of Covid-19 on Real Estate?

As I write this column on Tuesday, April 28th, the infection rate of Covid-19 seems to be leveling off, and the rule against in-person showings has been relaxed, although open houses are still banned.

The inability during much of April to show listings not only made it harder to sell homes, it also resulted in a reduction of roughly 50% in the number of homes being listed. Despite that, homes that were listed continued to go under contract quickly, thanks in part to good pictures and virtual tours.

It may be that the smart thing to do in April was to list your home. It was a matter of supply and demand — many fewer listings meant less competition for the homes that were listed, while buyers were apparently still willing to “pull the trigger.”  The key was to have good pictures and a narrated video tour because of the limit on showings.

I predict that there will be a bigger than usual surge of new listings in May and June, now that the no-showings rule has been relaxed. Although Denver and five other metro counties have extended their stay-at-home orders through May 8th, it was the Division of Real Estate and the state Attorney General’s office that were setting the rules about showings and open houses, and they don’t enforce local ordinances, so it’s expected that in-person showings will be happening throughout the metro area starting this week. Don’t, however. expect real estate offices to be open for walk-ins during this period.

So, what about the market going forward? The fact that mortgage rates are staying low, heading inexorably in the direction of 3% for a 30-year fixed loan, means that buyers are going to be supercharged as they go house hunting under fewer restrictions. There is pent-up demand, and there is also pent-up supply.

Nevertheless, we can’t ignore the near-depression economic conditions we face nationally in May. There will be many buyers not going back to work and unable to qualify for a home loan. However, the estimated 70% of Americans who were able to keep working from home or who had “essential” jobs, such as construction and health care, have been making good money — many earning overtime and/or hazard pay — and may want to reward themselves with a new home once things calm down.

So, while we real estate professionals have remained fairly busy during April,  I expect we’ll be even busier in May and throughout  the summer — especially as rules are relaxed. There will, however, be some subtle and not-so-subtle changes to the way we practice.

Most real estate agents were already accustomed to working from home, only going to their offices for floor duty, to handle paperwork, or to meet with buyers and sellers. Contract software has been online for a decade or more. We are used to emailing documents and having clients sign contracts electronically instead of on paper, which has served us well during the stay-at-home period. That will continue unchanged.

Showing appointments for nearly all MLS listings are handled by one company, ShowingTime, and increasingly the showings are being set online instead of speaking with an operator.

Where we will see the most changes will be with those activities that still require personal contact. Fist bumps and elbow bumps will probably replace handshakes long-term. We’re becoming hardwired as germophobes, I suspect.

Offices will be much cleaner. We’ll disinfect hard surfaces and wash hands more often. We’ll go back to having open houses eventually, but there may be fewer lookie-loos.

It will be a while before buyers want to ride in our cars, preferring to follow us to showings in their own cars.  I will continue to carry disposable gloves and Clorox wipes in my car, to use when showing homes.

More agents will learn to do their own narrated video walk-throughs of their listings, as Golden Real Estate agents have been doing for 13 years. And more buyers will look for those video tours and be more selective about the homes they choose to see.

In conclusion, real estate has shown great resilience during the pandemic thanks to how online the industry has already become, and I believe it will emerge from the current situation stronger than ever.

Why Real Estate Won’t Crash Like It Did Before

Many buyers and sellers of real estate are wondering whether we’ll see the kind of crash in real estate values that we saw in the Great Recession of 2008 onward. Experts agree that we will not.

In an April 22nd post, realtor.com explained that circumstances this time are quite different from then. Reasons cited by realtor.com’s economist, Danielle Hale, include the following:

First, the 2008 crash was created by a rash of bad mortgages — a situation that was remedied because of that crash. Second, there was an oversupply of houses for sale, whereas today there is an undersupply.

According to the realtor.com post, “There are simply too many would-be buyers out there: millennials eager to put down roots and start families, folks who lost their homes during the last recession and want to buy another property, and boomers looking to downsize.”

Lawrence Yun, chief economist at the National Association of Realtors, predicts that home sales will pick up again quickly and that prices will not fall.  He sees the luxury market taking the biggest hit, largely because the buyers of those homes may have lots of financial liquidity, but it is in stocks which they don’t want to sell while prices are low.

Also, widespread mortgage forbearance will prevent the surge in foreclosures we saw before.

Homes Are Still Selling

Each week I have been checking the MLS to see how many homes are being listed and how many are going under contract as the Covid-19 stay-at-home order remains in place.

For the weeks of March 22nd and March 29th, the market showed surprising resilience, with statistics comparable to prior years.  Now let’s look at the statistics for last week.

During the 7-day period from Sunday April 5th to Saturday April 11th, a total of 819 homes were entered on Denver’s MLS, REcolorado, within 25 miles of downtown Denver. Of those, 22 had already been sold privately, so there were only 797 new active listings. Of those, 133 were already under contract by Saturday.  A total of 25 were immediately withdrawn or expired, many of them likely because of the no-showings rule, which was issued that Monday.

This is a huge drop from the same 7-day period in 2019, when there were 1,631 new active listings, 227 of which had gone under contract by the end of the same 7-day period. 

In 2018, the numbers were similar, with 1,588 new active listings, 579 of which went under contract within the same 7-day period.

In 2017, the numbers were also similar, with 1,633 new active listings, 663 of which were under contract by the end of the same 7-day period. 

The numbers were equally impressive in 2016.

Bottom line? We are finally seeing about a 50% decline in new listings, but many of them are still selling quickly. Sellers who do list their homes may benefit from the lack of competition.