The Denver Metro Real Estate Market Trends Report, released on February 3rd by the Denver Metro Association of Realtors, reveals that detached single-family homes in the metro area set yet another record for average price, exceeding $629,000 in January. Attached single family homes (condos & townhomes) rose by less than half that amount, as shown in the above chart. Download the full report here.
The chart below is a compilation of various market indicators for the Denver metro area, which I am defining as a 25-mile radius of the State Capitol. There are some surprising differences this December from previous Decembers to be discerned from looking at that chart. I have included June figures but put the December stats in bold type to make it easier to compare summer vs. winter statistics over the last five years.
Historically, one would expect to see more sold listings, new listings and active listings in June than in December, and that trend held true in 2020, but the numbers for this December broke some new ground.
The number of sold listings and new listings were at record highs for a December, leaving the number of active listings at a record low. There has been lots of talk about how low our active inventory is, but, as I’ve written before, that’s not for lack of new listings but rather how quickly buyers are snapping up new listings.
The strength of this sellers’ market becomes more evident when you look at the other columns. In past years, the median sold price in December was substantially lower than it was in June, but the opposite was true this year, rising to a record $455,000. Correspondingly, the average price per finished square foot surged above June’s number to a record $246, and the median days in the MLS (“DIM”) plunged from last December’s 24 to just 7 days this December — even lower than the DIM for June 2020. The average DIM of 28 is more typical of summer months than winter, reflecting the fact that even homes that had been languishing on the market (because they were overpriced) were selling at a faster clip last month. Indeed 22% of the listings sold were on the MLS for over 30 days. Of those, 5.8% were active over 90 days, and 3.4% were active for more than 120 days. Those older listings are responsible for raising the average DIM.
Because of the well-publicized migration away from densely populated areas because of Covid-19, I was curious to learn whether single-family detached homes represented a higher percentage of the closings this December, compared to December 2019, but in fact the percentage dropped a little this year — 66.7% this year vs. 69.5% last year. The same was true in June, when the pandemic was already raging and we believed that people were fleeing condos for detached single-family homes. This is counterintuitive, and I can offer no theory to explain it, but I have more to say about this topic below.
Another measure of the strength of the current sellers’ market is how many homes sold above their asking prices. With December 2019’s days in MLS number so high (24), one hardly needs to ask, but here are the numbers. This December, 16.6% of the listings sold for their full listing price, and 42.2% sold above their listing price. Last year, those numbers were dramatically lower. While 15.8% sold for their full listing price, only 15.9% of listings sold above their listing price in December 2019.
So, what’s the prognosis for 2021? January is positioned to have a record number of closings, considering that there are a record number of pending transactions left over from December, as shown in the chart. With mortgage interest rates projected to remain at record lows — currently at or below 3% — there is a strong incentive for buyers to keep buying. Another factor favoring buyers is the movement of service sector jobs towards working from home.
To measure that trend, I compared the December-over-December sales in Downtown Denver, part of Capitol Hill and the Golden Triangle (specifically, a 1.2-mile radius from 20th & Arapahoe Streets in downtown Denver) and found there were 63 sales in December 2019 compared to 77 sales in December 2020. Meanwhile, there were 272 active listings in December 2019, but that surged to 444 active listings in December 2020. It’s a buyer’s market there.
In that same area, the days in MLS dropped from 43 days last December to 32 days this December (way higher than the 24 days vs. 7 days for the 25-mile radius in the above chart), but the median sold price plunged from $535,000 in December 2019 to $480,000 in December 2020. Compare that to the $40,000 increase in median sold price with the larger metro area, as shown in the above chart.
So, yes, it is still harder to sell a home in the densely populated central Denver area, and there is definitely an out-migration taking shape, but it’s still too early to call it an exodus.
Note: All these statistics were compiled from REcolorado, Denver’s MLS, excluding listings from other MLSs which are displayed on REcolorado.com. Often those listings from other MLSs are merely duplicates of REcolorado’s own listings, so I excluded them.
The Denver Metro Realtor Association (DMAR) has just released a report by its Market Trends Committee which noted that 22 different records were broken during October. Below is their summary, which is based on statistics from REcolorado, the Denver MLS. These statistics are for the entire MLS which lists property statewide but primarily the Denver metro area. Below is my own analysis limited to the Jeffco statistics from the same MLS.
(All Residential) 4,821 represents the lowest October on record. The previous low for October was 6,731 in 2016.
(Detached) 2,643 represents the lowest October on record. The previous low for October was 4,720 in 2017.
CLOSE PRICE — MEDIAN
(All Residential) $475,000 represents the highest amount on record. The previous record was $460,000 recorded in July, August and September of this year.
(Detached) $519,900 represents the highest amount on record. The previous record was $510,000 in September of this year.
(Attached) $339,425 represents the highest amount on record. The previous record was $335,000 in September of this year.
CLOSE PRICE — AVERAGE
(All Residential) $561,999 represents the highest amount on record. The previous record was $540,890 recorded in July 2020.
(Detached) $625,100 represents the highest amount on record. The previous record was $602,264 in August 2020.
(Attached) $393,733 represents the highest amount on record. The previous record was $384,902 in September 2020.
DAYS IN MLS — MEDIAN
(All Residential) 6 days represents the lowest October on record. The previous low for October was in 2015 of 10 days.
(Detached) 6 days represents the lowest October on record. The previous low for October was in 2015 of 11 days.
DAYS IN MLS — AVERAGE
(All Residential) 24 days represents the lowest October on record. The previous low for October was in 2015 of 25 days.
(Detached) 23 days represents the lowest October on record. The previous low for October was in 2015 of 27 days.
(Attached) 2,022 represents the highest October on record. The previous high for October was 1,657 in 2019.
(All Residential) 5,984 closed transactions represent the highest October on record. The previous high for October was 5,144 in 2019.
(Detached) 4,352 closed transactions represent the highest October on record. The previous high was 3,709 in 2019.
(Attached) 1,639 closed transactions represent the highest October on record. The previous high was 1,461 in 2017.
MONTHS OF INVENTORY
(All Residential) 0.81 months represents the lowest number on record. The previous record low was 0.91 months of inventory in September 2020.
(Detached) 0.61 months represents the lowest amount on record. The previous record was 0.72 months of inventory in September 2020.
(All Residential) 6,141 pending transactions represent the highest October on record. The previous high for October was 6,062 in 2017.
(Detached) 4,337 pending transactions represent the highest October on record. The previous high was 4,330 in 2017.
(Attached) 1,804 pending transactions represent the highest October on record. The previous high was 1,732 in 2017.
(All Residential) $3,363,002,016 sales volume represents the highest October on record. The previous high for October was $2,487,936,752 in 2019. July 2020 holds the all-time record of $3,965,805,480.
Of particular interest, in my opinion, is the difference between the median and average “Days in MLS.” While half the listings went under contract in 6 days or less, the average was 23 or 24 days. That gap is a reflection of how many homes are overpriced and linger on the market a long time, raising the average DIM when they finally go under contract. A search of currently pending MLS listings shows that 983 of them were “Active” for 100 days or longer before finally going under contract. Compare that to 4,097 listings that went under contract in 1 to 6 days.
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
On July 28th, Realtor.com published an article by Clare Trapasso (link) with surprising statistics about a surge in homeownership during the 2nd quarter of this year.
According to her article, which was based on a U.S. Census Bureau report (link), the homeownership rate surged to 67.9%, the highest it has been since the Great Recession of 2008. (See chart below.) That rate was 3.8 percentage points higher than the same quarter of 2019 and 2.6 percentage points over the first quarter of this year. Covid-19 arose during the last month of the first quarter, but it dominated the entire second quarter.
The homeownership rate in this century peaked at 69.2% during the second and fourth quarters of 2004.
As you’d expect, the homeownership rate varies among different age groups, currently 40.6% for adults under 35 and 80.4% of persons 65 and older. The rate has been rising in each age group. In 2015 (2nd quarter) it was 38.4% for the under-35 age group, and it was 78.5% for the 65-and-over group. The greatest increase was in the 35-44 age group, which increased from 58.0% to 64.3% during the same 5-year period.
Homeownership surged in every race and ethnic group in the second quarter from last year to this year. For Non-Hispanic Whites, the rate increased from 73.1% to 76.0%. For Blacks it surged from 40.6% to 47.0%, and for Hispanics of any race, it surged from 46.6% to 51.4%.
The Census report came with a caveat that its data collection methodology was impacted by the Covid-19 pandemic, shifting from a mix of in-person and phone interviews to entirely phone interviews, which resulted in a reduced response rate, declining from 70% in April to only 65% in June, compared to an average response rate of 82.7% during the second quarter of 2019.
Realtor.com’s chief economist, Danielle Hale, believes the increase in homeownership was distorted by the change in methodology. “It’s likely the homeownership rate rose, but I don’t think it’s likely that it rose that much,” she said.
According to the article on realtor.com, “After a pause during stay-at-home orders, the housing market has rebounded — and then some. The lack of homes on the market hasn’t discouraged the hordes of buyers from descending en masse, seeking to escape small, city apartments and cramped starter homes while taking advantage of record-low mortgage interest rates. (Rates dipped just below 3% for the first time ever earlier this month.)”
As an example, Rita and I just locked in an interest rate of 2.5% for refinancing our home’s mortgage with Jaxzann Riggs of The Mortgage Network. A buyer I’m working with was quoted a 2.25% rate.
“People still want to own homes, and with mortgage rates low, a lot of people are taking advantage of that even though there are lots of scary things going on in the economy,” says realtor.com’s Hale.
The article continues, “This has led median home prices to shoot up 9.1% year over year in the week ending July 18. That’s despite a recession and the most widespread unemployment since the Great Depression. Meanwhile, the number of homes for sale is down 33% compared with the previous year, when the nation was already experiencing a housing shortage.”
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.
Nothing has surprised us real estate professionals quite as much as how hot the market has been during the Covid-19 pandemic. Redfin, the brokerage with what I consider misleading TV ads, did an analysis of offers written by their own agents on MLS listings and found that over half of those offers faced competing offers from other agents.
Nationwide, the percentage of Redfin offers facing competition was 53.7% in June, up from 51.8% in May and 44% in April. Boston led the pack with 72.4% of offers facing competition during June, up from 67.2% in May.
The Denver market came in 12th nationally in terms of bidding wars, with 53% of offers facing competition, down from 55.6% in May. Of the top 12 metro areas, only Denver and Portland had lower percentages in June than in May.
If you’ve been wondering how Denver’s real estate market would make it through the pandemic, here’s an early answer: it’s doing great.
The chart below shows the record surge in contracts and sales. Contracts, which surged in May, surged further in June, along with a large jump in closings. (Statistics are for listings within a 25-mile radius of the state capitol building.)
The following table shows how the first six months of the past five years compare with each other in several key metrics, demonstrating among other things that the median days on the MLS has dropped as it has done in previous years from January through June, and that the average price per finished square foot has continued to rise year over year.
At Golden Real Estate, we have detected increased interest in relocating to Colorado from both coasts. The pandemic put apartment dwellers, in particular, in more fear of catching the virus, especially those dependent on elevators. Of course, we have apartment buildings in Denver, too, and we’re seeing people from there as well wanting to be “on the ground,” able to get outside without coming in close contact with others.
Not content with simply buying a detached single-family home, some buyers are looking to buy homes on acreage. Some are moving to the western slope.
All the after-effects of the pandemic are yet to be fully understood, so it should be an interesting rest of 2020. For example, permanent implementation of working from home could trigger an increased migration from city to countryside.
One thing is clear for now — that the real estate market is going to stay active and that it will be a seller’s market, although we have observed that overpriced homes are sitting on the market more than ever. When a home doesn’t sell within the first week, it’s important to lower the price right away instead of letting the listing languish on the MLS at its original listing price.
Yes, the Covid-19 pandemic hurt the real estate market in April, but it sure made a rebound in May! The 13-month chart below is for Adams, Arapahoe, Broomfield, Denver, Douglas and Jefferson counties.
Last week and this, you probably heard or read about how bad the real estate market was in April, and that was true here in the Denver Metro area, as it was throughout the country.
Pending sales of new and existing homes in April were roughly half the pending sales of April 2019. But pending sales in May surged to a number that was greater than the number for any month since before 2010, which is as far back as REcolorado’s statistics application goes.
The number of closings in May was somewhat low because of the low number of homes that went under contract in April. The number of closings in any given month is always within range of the number of pending transactions the previous month.
(Note: The number of pending and closed sales for May is from June 1st, It could go up as additional May contracts are reported on June 2nd & 3rd.)
It should be noted that, despite the lower number of pending and closed listings in April compared to 2019, the median sold price was much higher — $435,000 vs. $415,000 in April 2019. The median sold price for May was also higher than the median sold price that month in 2019.
It’s also worth noting how quickly listings went under contract in April and in May. April listings went under contract in 5 days (median figure), which was even faster than last year, while May listings went under contract in 8 days (median) vs. 7 days last year.
These statistics may come as a surprise to those who think that the real estate market is on a downturn because of Covid-19. I am as surprised as anyone at the resilience of our real estate market.
Driving the market is the fact that there is still a low supply of homes for sale and an over-supply of people needing or wanting to buy a home. That explains the low “Days in MLS” figure for April when the number of homes for sale was so low. Because so many sellers postponed putting their homes on the market during the lockdown, it became more of a seller’s market than before. That meant that the homes that were on the market had less competition for the large number of buyers.
Given what we’re seeing now, it’s hard to be pessimistic about the future of our real estate market, however pessimistic we might be about the country as a whole, given the rioting in multiple cities around the country, including Denver. We’ll see in June how much impact that may have.
Another wildcard is the possible resurgence of the coronavirus, given how our state, like others, has yielded to pressure to reopen earlier than CDC guidelines recommended. A resurgence could result in another stay-at-home order.
Despite the best efforts of state, local and federal governments, there will surely be people who are suffering financial hardship and have had to put their dreams of homeownership on hold. I wish them well as they dig themselves out of this terrible situation.
For those who are surviving Covid-19, however, and don’t get sick from it in the coming months, the continued record-low interest rates are making home purchase more attractive and more affordable.
As you’ve no doubt heard, the Federal Reserve has plunged hard into softening the impact of the virus and its attendant effects on the economy by reducing the Fed Funds interest rate used by banks to near zero. While this rate is unrelated to mortgage rates, we are also seeing those rates staying below 4% and approaching 3%, which is propping up the real estate market in a big way.
People who can afford to buy a home and have the income to qualify for a mortgage are getting off the fence. This is evident from how many homes are going under contract quickly, often with competitive bidding.
In the first 10 days of May, there were 2,306 homes within 25 miles of the State Capitol entered on Denver’s MLS. 615 of them were under contract by May 10th. Another 171 homes were entered as “Coming Soon” as of this Tuesday.
While that’s less than the first 10 days of May 2019, when 3,348 homes were entered on the MLS and 795 of them went under contract by May 10, it’s still an impressive amount of activity, and is probably due in part to the excellent mortgage situation.
Another factor that will stimulate purchasing among the wealthy is that the stock market has recovered more than half of its early losses due to the virus. That makes it more likely that investors would be willing to liquidate stocks to finance a cash purchase of real estate.
In April 2019, about 48% of homes sold at or above their asking price, and 46% of them sold in a week or less. This year’s performance is better. Of the homes that closed during April 2020, about 58% sold at or above their asking price, and about 62% sold in a week or less. Those statistics tell me that we have a pretty active sellers market, which stands in contrast to the gloomy economic situation caused by Covid-19.
It’s hard to believe that the real estate market will tank later this year if it is not tanking already.
I’m seeing that dynamic myself. As of this writing, all my own listings are either under contract or closed, including the Wheat Ridge home featured as “coming soon” a couple weeks ago. That $550,000 brick ranch was only listed as “active” on the MLS last Tuesday, and showings didn’t begin until Saturday, but our first offer came in on Sunday, and it was under contract at better than full price by Tuesday morning.