The past few months of data have shown a bit of a slow down in our market – a market where it’s a little harder to sell and a little easier to buy a property than it was in the recent past. Our brokerage recently surveyed 1000 local Realtors. The near-consensus: the market is slower than normal at the moment, but most buyers and sellers have not changed their plans to buy and sell this spring. We think this temporary lull in the market is a one-time gift to buyers – their best opportunity in at least three years. As days on market (DOM) for homes could continue to increase, I want to offer some advice to sellers and buyers.
First we’ll start with Sellers:
Over the past 24 months, homes that were priced correctly at initial listing (i.e. did not require a price reduction) sold in 13 days on market (DOM). Mis-priced homes that required a price reduction needed 58 DOM – over four times as many DOM!
In a very strong market (2015- mid 2018), properties tend to sell for close to asking price, or even at a slight premium. In a very slow market (2009-2012), properties might need up to a six percent discount (luxury housing) or three percent discount (all other housing) to final asking price. As inventory increases, which is currently in the process of happening in the greater Denver area, discounts will slowly increase.
To the surprise of most sellers, buyers usually will not make an offer on an overpriced house – they simply move on to the next house. A house needs to be priced within one to three percent of final sales price to get any offer.
2. When to Sell?
If you are trading up, it does not really matter when you list your house.
If you list in the Spring, your old home could go under contract (UC) quickly (there are many buyers in the market), but you will likely have a little more competition to find your replacement home.
If you list in the Fall, your old home may take longer to go UC (there are fewer buyers in the market), and you may be more likely to accept a contingent offer than in the Spring.
If you list over the holidays (mid November – mid January), marketvolume is typically at its lowest. You may not have many showings to prepare for, but the showings you do book tend to be very qualified and very motivated.
However, if you are only selling, the time of year can make a difference in your ability to sell, and your ability to sell quickly. If you are only selling, then January through April is likely to be a little easier. If you do list in the Fall or Winter, be sure to price your house accurately. It never pays to “test the market”.
In the graph above, we can examine the number of showings an active listing gets in an average month. The dotted lines are years with recessions – you can see the showing traffic was modest. The solid lines are more recent years when the market has been strong – showing traffic was generally higher during this time. During 2018 (the blue line), the year started strong in the Spring, was somewhat above average in the Summer.
I noted a decline in showing traffic in September, but October showed some recovery. In a slow market, every showing is more important than the last to a seller. If you intend to sell your home, ensure your house is always “parade ready”, and make your showing times as flexible as you can. When you receive an offer, work hard with the buyer to complete the transaction as efficiently as possible.
Denver and the Front Range are not unique. The national media has reported similar patterns across most of the US. There are many theories as to why this economic slowdown has happened, but no one can really know.
So, while there is statistical evidence that the market is slowing down, I am still not convinced that it is the economic slowdown. The stats for 3Q 2018 parallel the buyer, seller, and agent behaviors we saw in 3Q 2016. This could be due to the biennial elections or the recent controversy surrounding the supreme court.
To me, this simply feels like nothing more than the natural progression of ups and downs that come with working in the real estate market. I am optimistic that the market will return back to “normal” during the Spring season.
If you have any questions or concerns about the market, please give me call, I’d be happy to address them for you!
BUYERS – take advantage of this opportunity while you can!
If you are a buyer, it’s a better time to buy than any time in the last five years. The number of homes active on the market in 2016-2018, relative to the population, was at the lowest level ever. Currently, the inventory is less than a third of the historical long-term average. However, there has been a recent inventory build that will be a welcome relief to buyers as these houses are being finalized.
As the inventory increases with new builds, days on market (DOM) will also increase. Sellers are often surprised their homes didn’t sell the first weekend, so some sellers are more motivated than usual.
Unsurprisingly, this has brought a significant number of reports that sellers are much more likely to accept contingent offers. It has also been reported that sellers have been more likely to accept offers at a little less than asking price.
If you are a first-time buyer or investor, this is an excellent opportunity! We can never be sure how long this opportunity will last, but I recommend that buyers take action before February, as late January is historically when the spring sales boom begins.
If you are ready to buy, reach out to me! I’d love to help assist you through this journey.