The best way to truly understand our real estate market is to take the time to dig deep and carefully examine the numbers. Whether you’re a homeowner wanting to understand the current value of your home, a renter thinking about taking the plunge into home ownership, or a real estate investor looking for your next opportunity, understanding market data is critical.
So this month I’m going to walk you through the REcolorado metro Denver quarterly snapshot, explaining each entry to help you better understand our current housing market. These numbers are for all single-family homes, condos, and townhomes sold in the metro Denver area and listed on the MLS (Multiple Listing Service), a real estate source that provides accurate and structured data about properties for sale.
Active Listings: 7,378 – Down 1.3 percent year-over-year. The number of active listings has plummeted since the market began recovering in 2009. In 2007, during the middle of the downturn, we had over 31,000 homes on the market – a true buyers’ market. Now the tables have turned! We had only 7,378 homes on the market at the time this snapshot was published, an incredibly low supply of homes for sale and the root cause of our current seller’s market. If you’ve ever thought about selling, this is the type of market you’ll want to sell in!
Under Contract Listings: 6,434 – Down 1 percent year-over-year. Slightly fewer properties went under contract this July versus last July. The lack of housing inventory is keeping these numbers low. Until more inventory returns to the market, we can continue to expect the number of properties going under contract to remain low.
New Listings: 6,557 – Down 3.9 percent year-over-year. The number of new listings continues to diminish, resulting in the meager housing inventory in our market. Our supply and demand equation is incredibly unbalanced with a significant number of buyers looking to purchase a home and very few sellers willing to list theirs. This imbalance is responsible for the increasing rise in prices the past seven years.
Sold Listings: 4,884 – Down 8.2 percent year-over-year. This number surprises a lot of people. So many are under the misconception that tons of homes must be selling, but nothing could be further from the truth. Our inventory is close to the lowest inventory per capita ever in metro Denver. The result of that being the number of homes sold is down, not up, by a very significant number–8.2 percent is a major drop from last year.
Total Days on Market: 20 – Down 2 from last year. A balanced market will have even supply and demand, with homes spending about 90 days on market. Twenty days on market shows demand for housing is extremely high and sellers are selling their homes in near-record time. If you have been out looking at homes recently you’ll know what I mean. More often we run into other people looking at a property at the same time we are because there are so few properties available, making for an extremely competitive time to buy. Smart buyers have learned to act quickly to get the home they want, driving the days on market even lower.
Median Sold Price: $385,000 – Up 9.5 percent year-over-year. The median price is the middle price of all homes sold – not the average price. For example, if five homes were sold in an area at the following prices: $100,000, $200,000, $300,000, $800,000, and $900,000, the median priced home is $300,000 (2 homes sold for more, 2 homes sold for less), but the average priced home is $460,000. Over the past 40 years, metro Denver home prices have increased on average 5.9 percent per year. The past year’s 9.5 percent increase is significantly above average – a result of high demand for homes, little supply, a strong employment market, a solid economy, etc.
Average Sold Price: $449,041 – Up 9.7 percent year-over-year. The fact that the Median Sold Price and the Average Sold Price percentage changes are almost identical means the market is more or less consistent both above and below the average and median prices.
Percent of Sold Price to List Price: 100.3% – Down 0.4 percent year-over-year. A sign of a strong market is when the actual sold price compared to the list price is almost the same, as it currently is in our market. In a weak market, buyers will make lowball offers and often get the property well below asking price. However in a market like ours, sellers are getting on average more than what they’re asking. Today, homes are selling 0.4 percent above the asking price! That percentage is almost identical to what it was a year ago. This is a great indicator of a strong housing market.
What do the numbers mean?
The main take away from these numbers is simple: the market is still incredibly hot and I don’t see anything that’s going to change that in the immediate future. Too often, so-called experts and the media pounce on a singular statistic or metric and take it completely out of context. They’ll write a startling headline predicting a major shift in the market, only for the purpose of causing a stir and thus attracting attention to their writing.
The reality is a lot simpler, and frankly pretty boring. We’re 7 years into our strong seller’s market and not much has changed as of late. We need DOUBLE the number of listings we have now to truly begin affecting our housing market. Prices continue to rise because another 50,000 have been added to our Front Range population in the past year. At the same time, inventory remains near record low. You don’t need a calculator to understand what that means.
If you’re reading this newsletter you probably have somewhat of an interest in real estate. The more you learn the more likely you’ll make the right decision when it’s time to make a move. I study these figures and many others in hopes to try and help you achieve your goals. Please feel free to contact me if you have any questions or would like to discuss anything further!