As you know from reading this newsletter every month the best way to really understand the real estate market in Denver and surrounding areas is to carefully examine sales activity, market rents and other relevant data. Whether you’re a homeowner wanting to understand how your biggest investment is doing, 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 makes sense of our housing market. These numbers are for all single family homes, condos and townhomes sold in the metro Denver area and listed on the MLS
Active Listings: There are 8,065 homes currently listed, a 9.3 percent year increase from the prior year. The increase includes many overpriced unsold listings from the prior period. In 2007 during the middle of the downturn there were in excess of 31,000 homes on the market evidencing a true buyers’ market. In contrast, at the time the current snapshot was taken only 8,065 homes were listed on the market, representing a limited number of homes in the supply change, translating into higher sales values. If you’ve ever thought about selling a property, now is the optimum time to sell. If you’re a buyer you want to be pre-qualified and have funds available to close prior to making offers. As a buyer, you must also be realistic in terms of offering price and terms.
Under Contract Listings: 6,419 down 0.2 percent year-over-year. Almost the exact same number of properties went under contract this July versus last July. The low inventory of properties on the market has remained constant because there is so little for buyers to choose from. Until inventory returns to normal levels, we can continue to expect the number of properties going under contract to remain low.
New Listings: 6,456 down 1.8 percent year-over-year. The number of new listings continues to drop, leading to the extremely low housing inventory in our market. Our supply/demand equation is out of balance with a huge number of buyers looking to purchase a home and very few sellers willing to list theirs. This has led to a robust real estate market and the resulting rise in prices the past seven years.
Sold Listings: 5,323 down 3.4 percent year-over-year. This number surprises a lot of people. Some have concluded that there is feeding frenzy with many homes being sold. Nothing could be further from the truth. Because the inventory of homes is so low – close to the lowest inventory per capita ever in metro Denver – the selection of homes available to buyers is limited. Consequently, the number of homes sold has actually gone down, not up.
Total Days on Market: 20 days, the same as last year. A normal market of balanced supply and demand will have about 90 days on market (which is the same as six months of inventory in case you run across that number). A stronger market will have fewer days on market and vice versa. Twenty days on market is incredibly low, which translates into high demand and properties being sold in near record time. Buyers who have recently been looking at homes can attest to this phenomenon. Oftentimes, would be buyers discover that others are looking at the same property given the paltry inventory of homes available for sale. Smart buyers have learned to act quickly to get the home they want, driving the DOM even lower.
Median Sold Price: $415,000 up 7.8 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 7.8 percent increase is above average, characteristic of high demand for homes, limited inventory in the pipeline, a strong employment market, a strong economy, etc.
Average Sold Price: $478,323 up 7.2 percent year-over-year. When the Average Sold Price is below the Median Sold Price it means that the lower end of the market is doing somewhat better than the higher end of the market, and of course the opposite is true as well. The fact that both yearly 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: 100.1% down 0.2 percent year-over-year. A sign of a very strong market is when the final sales price compared to the list price is almost the same, as it currently is in our market. In a weak market buyers will try to lowball an offer and often get the property well below asking price. But in a market like ours, sellers are getting on average more than what they’re asking! What we often call the Average Discount isn’t a discount anymore, it’s the opposite. I guess we’ll have to start calling it the Average Premium! Today, homes are selling 0.1 percent above the asking price and that percentage is almost identical to what it was a year ago. This is another sign of a strong housing market.
The main takeaway 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. I find that too often so-called experts and the media pounce on a stat or metric and take it out of context. They’ll write a startling headline predicting a major shift in the market only to attract attention to themselves and their writings. And unfortunately, they’re completely unaccountable for this egregious and unprofessional behavior.
The reality is a lot simpler, and frankly pretty boring. We’re 8 years into our strong sellers’ market and not much has changed lately. We have a few more properties for sale than we had a year ago, but we need DOUBLE the number of listings to begin to truly affect our housing market. Prices continue to rise because we added another 40,000 to our Front Range population in the past year and inventory remains near record lows. You don’t need a calculator to understand what that means.
If you’re reading this newsletter you probably have at least a passing 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 to try help you achieve your goals. Please feel free to contact me if you have any questions or there’s anything I can help you with!