Something changed in the Denver real estate market in 2018. Last year we saw more record prices and fierce competition for a limited number of homes. This year has brought a very definite shift in home sales, changing the landscape of Denver Real Estate. What changed that has caused the slow-down in sales?
We Are Not Alone
Start off with the bigger picture and the real estate shift across the country. Denver isn’t the only city seeing changes. According to the Wall Street Journal, home sales slowed in every region of the US in October by as much as 18.5%, with an overall average slowdown of 12%.
Looking specifically at Denver, the news isn’t as dramatic. Single family home sales were down in October 10% from the same time last year, with condominiums and town homes down 8% for the same period. Granted, our market has slowed, but not to the extent of other areas in the nation.
We Love Colorado
Part of what has kept the Denver Metro area on the sunnier side of the market shift is the continued migration of people into the state. Colorado has jobs, a good climate, recreation and of course our amazing mountains. As long as we have a net gain in population, demand for affordable housing will remain positive. And that’s the key word … affordable.
The Cause of the Change
With a ten percent drop in sales from 2017, it would seem home prices would follow the trend. But they didn’t. The average price of an attached home (condo or townhouse) is up 11.4% from November 2017. Detached single family homes are up 4.8%. How do you have falling sales but increases in price?
The average price of a detached single family home in Denver has topped $500,000. Buyers have turned to the condominium market, where the average cost is in the mid $300’s. Even with a strong economy, wage increases are not keeping up with housing costs, so people are transitioning from the big house to more affordable options.
This would also explain the paradox with builders in Denver. Home builders say they have not caught up with demand, yet they have “move-in ready” homes sitting on the market. The key is price. They may not be keeping up with demand for the affordable sized homes. The big expensive houses are sitting.
Crash? Correction? Neither?
The housing market isn’t crashing. Putting the market into perspective of past decades, five to six months to sell a home has been the norm in good years. Selling in two months today should still be considered very good. Interest rates in the past, even in good years, have been multiple points higher than where we are today. Prices are holding, if not rising. There is no sense of desperation.
Is this a correction? It’s difficult to call it a correction when home prices continue to rise. It’s more of a buyer adjustment. While we continue to have a positive gain on new residents, this too, has slowed. Interest rates and higher prices have pushed a portion of home buyers out of the mix. Buyers with less competition to contend with are spending more time looking at homes and making more informed decisions.
A Great Time To Buy or Sell
This is a good time to purchase a home in Denver. Many people don’t realize the sweet spot we are in. Sellers continue to list for top dollar. Even if they have to negotiate purchase price and make some concessions to seal the deal, they are typically sitting on a ton of equity.
For the buyer, they have time to consider which house they like and unlike past years, have the ability to do some negotiating with the seller. Home prices are expected to continue the upward trend, although not as fast as we have seen. Prices may be high, but they are going higher. Buying today will mean equity in the future.