The purpose of this post is to help you stay current with the state of the metro Denver real estate market. I like to provide insights, opinions, observations, and most importantly, hard data to help you make one of the most important financial decisions of your life: whether to buy or sell a property. Typically, I don’t like to jump on the latest rumor of interest rate increases (or decreases), the market being about to crash (or skyrocket), or any doom and gloom forecasts you see on so many other real estate blogs and newsletters.
Data Worth Looking Into
With that being said, I want to bring to your attention some very recent data that does have me closely examining the state of the real estate market. I’m not calling the peak of the market, nor am I saying this is the beginning of the downturn so many have wrongly predicted for years. What I will show you is that the past few months of data look a lot like a market beginning to slow down – 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. Time will tell if this is a just hiccup, or if this slowing will continue and begin to truly affect the real estate market. What is for sure is that the data is worth looking into.
Let’s begin with the September Data Snapshot provided by the Denver Metro Association of Realtors. What you see from the past couple of months is a market with increased inventory, resulting in longer Days on Market and a year-over-year price increase that has begun to slow down and return to the long-term average of 6 percent per year. By no means should we be alarmed by this data. The market is still quite strong – just not as strong as it was a few months ago. The increased inventory (16.1 percent higher than September 2017) and resulting higher Days on Market is what I would expect to be the precursor to a cooling market. While it’s only the past couple of months that have exhibited this slowdown, a higher inventory of properties on the market will eventually lead to a market more favorable for buyers.
To put the inventory of homes for sale in better perspective, take a look at the chart below. The purple line shows the number of properties on the market every month going back to January 2007. The blue dotted line shows the number of sales every month. What you saw during the downturn between 2008 and 2010 was an astronomical number of properties for sale (over 26,000 at its height!), which caused a huge buyer’s market and a crash in prices. Starting around 2010 and picking up in 2011, the inventory began falling and the market became balanced. Since 2012 there has been a serious shortage of properties on the market resulting in our super strong seller’s market. This is exactly how markets are supposed to work, ebbing and flowing over time.
More Homes on the Market
Now, what you can see the past couple of months is an uptick in the inventory – a small but noticeable rise in the numbers of homes on the market. As a matter of fact, 8,807 properties on the market in September is the highest number we’ve seen in four years. From the same chart you can see we still have historically low inventory, but if the number of homes on the market continues to rise over time to the 15,000-17,000 mark, we’ll sooner or later return to a balanced market.
The last graphic I want to show you is a metric that Your Castle invented years ago which compares the average number of showings per listing per month. The higher this number is, the stronger the real estate market. A higher number means there are either more showings per month, fewer listings on the market, or both. The opposite is also true. A lower number means either there are fewer showings per month, more listings, or both, which translates into a weaker market. What you see in this graph is that the number of showings/listing/month plummeted in September 2018 (blue line) down to about seven, suggesting a weaker market during that month.
What Does This All Mean?
Piecing all this data together would suggest that the market has lost its strength the past couple of months. No one knows for certain what will happen over the coming months and years but you can rest assured we’ll be tracking the Denver real estate market closely and reporting back to you every step of the way. Please give me a call if you want to chat more about this. I’m always happy to talk about our super exciting, ever-changing real estate market!