The buzz is going through real estate offices across the city. The Denver real estate market has made a noticeable shift. More properties are available, and prices have come down. Agents, lenders and title reps are all discussing the recent changes, wondering what happened and where the market is headed?
Based on current national and local economies, this isn’t a bursting bubble by any means, but a correction. The interesting point is the timing. June and July are the peak sales months in Denver real estate, yet the market began to pull back in May. While some brokerages have reported significant drops in listings in the past 60 days, other offices are continue to run strong.
The Stats Tell A Different Tale
To get the story behind what is happening you have to look at the local statistics. We need to start by segmenting attached residential, meaning condos and town homes, from detached residential, meaning single family homes. Segment this again by price; the averages above $400,000 and below $400,000. By looking at the segments individually, they each tell a different story.
When a property is listed in the MLS, the listing agent sets a time-line when the listing should start and when it will stop. Listings have a definite end date. If the property isn’t sold within that time period, the listing expires. In a robust seller’s market, like the one we have been in for the last four years, the expired number is typically low. When sales slow, the number of expired listing increases.
While is sure feels like there is a big shift in the market, expired listing don’t tell the same tale. One would expect the expired listings to be on the rise, but instead we see the overall number a little lower than June 2017. To be fair, however, listings are typically set for 3, 6 or even 12 months in duration, so it is possible a property listed in April or May might not have sold yet, but has not expired either. This will be a statistic to watch over the coming months.
Days On Market
The other factor to look at along side expired listings is Days on Market. Looking back at June 2017, the average number of Days on Market for a detached residential property was 24 days. Last month, June 2018, the number dropped by a day to 23 Days on Market. Not the direction we would expect for a slowing market, and in fact, this is the lowest it has been since 2014.
Are We Crazy?
While the statistics are telling us one thing, there is no question we are seeing changes in the market. This is where we need to look at the over $400,000 market, and the under $400,000 market separately. They are acting differently, giving conflicting messages.
In the higher end of the market we saw a big jump in new listings in May and June. In fact, compared to 2017 it was about a twenty percent increase. Perhaps sellers are sensing the top of the market, or they are beginning to feel comfortable with the idea of finding a replacement home if they sell, nonetheless, there is a surge in new listings.
On the lower end, under $400,000, there were fewer new listings as compared to last year, which remains true even if you add condos and town homes to the mix.
What’s it All Mean?
There are three areas to look at when deciphering what all of this means. First, the Denver Post reported in March that the influx of new residents to the state has slowed from the high a couple of years ago, but there is still a net gain in new residents. As long as we have a net gain in people coming to Denver, housing will remain strong.
Second, Even though the number of new listings in the under $400,000 market has decreased, so has the number of buyers. From “buyer fatigue”, where buyers have given up the battle on finding a new home, to higher prices and interest rate increases that have simply pushed some buyers out of the market altogether. This is lightening the demand.
Third, the big elephant in the room is the number of new homes and condos being built along the entire Front Range. New construction is everywhere, from new builds to investor scrapes. Builders may finally be catching up to demand, which is also taking the pressure off existing home sales.
Did We Hit the Top?
It’s a pretty solid bet we saw the top of the Market in April. The median sale price for a home in the over $400,000 market was $539,100. In June the median sale price in the same market fell to $530,000. Going forward, prices typically decrease through the summer and fall. All eyes will be on pricing in early 2019.
The Crystal Ball
On the higher end prices are dropping. This is what is causing the chatter around the city. But falling prices are keeping sales strong and expired listings on track with prior years. Price reductions are likely the reason Days on Market has dropped for the segment over $400,000.
On the lower end, the under $400,000 segment is holding without much change. As interest rates increase, we’ll see the lower priced properties begin to make the same shift and prices retreat.
Even with the market shift, it’s still a good time to sell. Selling prices will decrease, especially on the higher end, but we are still at all-time highs, giving sellers big profits. The lower end of the market will remain strong as long as builders are still lagging. As always, location will play a part as well. Buyers may still struggle in more popular parts of town, but there are other areas where would be homeowners will have a much better chance of getting the home they want.