A REBOUND IN CONFIDENCE, BUT INVENTORY LAGS BEHIND
Winter is winding down, and spring has officially arrived! As we pass the 1-year mark since the pandemic began, some things are considerably different from last spring. Consumer confidence has come a long way since the turbulent shutdown last year. Three FDA-approved vaccines are currently being administered. As of April 2nd, Colorado is in Phase 2 of vaccine distribution, meaning all Coloradans age 16 and older are eligible to receive the vaccine. Congress also approved a third wave of stimulus checks for many people. Many checks were sent out last month across the country, further soothing some of the financial burden from the ongoing pandemic.
On the other hand, housing inventory continues to lag in seven counties that make up the Denver metro area. The average number of listings in February is historically 13,500. At the end of February 2021, there were only 2,025 active listings, a record low (includes attached & detached homes). This February was down 58% in inventory from the same time last year. The simple fact is that we need to reach a critical mass of people getting vaccinated for some sellers to feel safe opening up their homes to strangers. We do not expect this to happen until sometime this summer.
INFORMATION FOR BUYERS:
Interest Rates Are on The Rise
The average 30-year fixed mortgage rate recently increased to the 3% mark for the first time since last July. This may discourage some buyers, potentiallylessening a bit of the competition in the market. Despite this recent increase, it is important to keep in mind that 3% is still historically very low. In Feb. 2020 before the pandemic hit, the rates were already considered historically low at 3.5%. In comparison, rates were at 4.5% in Feb. 2019, and 6% in Feb. 2008 at the start of the last recession. These increased rates mean that a homeowner would owe more money in interest over time. However, they would also be gaining equity at a faster rate, as appreciation in Metro Denver is up to nearly 20% from this time last year.
Lately the media has been focusing on the most extreme cases of homes selling for more money than their list price, further frustrating buyers. They have highlighted homes that have had over 100 showings in the first weekend and 20+ offers, telling buyers that they need to be prepared to offer 20% above the asking price on homes. Although this is an extremely competitive market and that is true of select homes, it is certainly not the norm. In February, on average, homes sold for a 1.9% premium (See the February Market Snapshot Graphic.) For a $350K home, this would amount to $6,650 over the asking price. It is still a dramatic reflection of low housing inventory, but not as dire as a 20% markup. Many homes still sell at, or near, market value.
Many buyers are getting frustrated over getting outbid on brand new listings. One helpful strategy to combat this could be to focus on homes that have been sitting on the market longer than one weekend. These homes may be perceived as defective by buyers. However, in many cases, they were simply just priced too high by overzealous sellers. After being passed over by buyers for being overpriced, or having passed on decent offers, these sellers may sign lower offers than they had initially hoped to accept.
INFORMATION FOR SELLERS:
A Strong Seller’s Market Continues for Now
The 30-year fixed mortgage rate has slowly been on the rise since the year began, as it appears that it bottomed out at the end of last year. As these rates continue to climb past 3%, some marginal buyers will pull out of their home searches. This will gradually reduce the buyer pool. In addition, it is all but guaranteed that as more people are vaccinated and comfortable with people in their homes, many first-time sellers will list their homes to try and capitalize on the current seller’s market. Over the course of the year, this should increase the available inventory. Although showing traffic is still incredibly high and it is expected to remain a seller’s market for quite some time, the new inventory will most likely reduce some of the current fervor in the market.
As a prospective seller, especially in the $1MM+ price range, act now to get the most out of your home sale. 63% more homes over $1MM were sold in Feb. ’21 than in Feb. ’20. Buyers are cashing in on low- interest rates while they can.
For listings under $800K, you should be getting 20 showings in the first week on market. If not, odds are that your home is overpriced. Although the market is in your favor, you should expect that if you get 10-20 showings the first weekend and receive an offer, and that offer is at-or-near asking price, that is totally normal. Do not lose out on a good offer because you are reaching for the far-off 20% above asking price sale. Throughout the process, remember the reasons why you are selling your home and celebrate that closing when it happens!