Detached Housing Inventory Count Remains at 30-Year Lows
The top story in real estate this year continues to be an extreme lack of homes for sale across the nation. Inventory in Metro Denver continues to decline dramatically for both homes and condos. This year, the Months of Inventory (MOI) started at 30-year lows (around 0.3 months). This trend has continued right into the spring. On the bright side for buyers, coronavirus vaccines should encourage on-the-fence sellers to take the leap of listing their homes to help relieve the inventory shortage. Hopefully, by as early as this summer, these sellers will feel safe enough to invite people in for showings.
On a broader scale, the housing shortage is harder to solve than many people may think. Preparing land for new construction and going through the necessary permit processes can be a multi-year affair. Homes cannot be built fast enough to meet current demand. Our current housing market is a result of basic supply and demand. There are not enough homes on the market and construction is slow due to pandemic fears. These factors mixed with a strong supply of buyers are causing average prices to rise. In Q1 2021 average home prices were up 19% for detached homes and up 10% for condos. This is well above the 6% average appreciation from 1971‒2018. However, it is also important to note that these dramatic price increases are partially due to an influx of luxury listing sales over the past year. Strong price appreciation is expected to continue across all price ranges for the first part of the year, but more moderate price growth is likely in the second half.
Information for Buyers
Frustrations continue for buyers and their agents, but deals are still closing!
The scarcity of listings on the market has been the talk amongst agents this year, who are submitting offers in very competitive situations, often for over the asking price of homes. Despite tough times, there are still ways to make your offers look more attractive to sellers. For example, an Appraisal Gap Guarantee, in which, in the event the property does not appraise at or above the purchase price, the buyers promise to pay a certain amount over the appraisal price of the home. This can be an extra incentive for sellers to accept your offer over other offers that do not contain such a guarantee. Most buyers are also not negotiating as hard with sellers to fix minor inspection issues that may arise since sellers currently have the upper hand in negotiations. Some buyers are even waiving the inspection altogether to get deals done, but that is not recommended or prudent because you may get stuck with serious and costly issues to fix down the road. Whatever the case may be, an honest discussion with your agent can make all the difference to stay competitive in these situations.
Information for Sellers
Can I get offers over list price? We may be able to help!
For many home sellers in Metro Denver, the scarcity of inventory can be a blessing. If your home is in the entry-level ($0-$300k) to mid-range ($300-500k) price range, your home is likely in high demand. This makes negotiations much easier than they would be normally. Colorado is even in the top bracket of states across the nation, with over 50% of homes selling for over list price! To what extent your home might sell over the list price will depend, in part, on the desirability of your neighborhood.
Our brokerage has created “Sold at a Premium” price change maps. These are heatmaps showing which Denver neighborhoods had the most homes selling above the asking price for 1Q 2021. On this map, green means that under 25% of sales were at a premium. Red means 75% or more sold at a premium. As you would probably expect, very expensive areas like Cherry Hills had few homes that sold at a premium. Whereas homes in cheaper neighborhoods sold for huge premiums because of strong demand for entry-level homes.
Keep in mind that you can never underprice a home. However, even in a market such as ours, you can overprice a property. Having a knowledgeable agent is crucial to your success, on either side of the transaction. Don’t hesitate to reach out to see how we can help you achieve your real estate goals!
Here are some more market stats comparing March 2020 and 2021: