It’s been one of the hottest topics in the last few months. Realtors, lenders, buyers and sellers are all talking about the housing market shift we saw in Denver over the summer. While there is no question things have changed, is it as drastic as it seems?
Get Ready for Some Numbers
It is true that in October home sales were down from the previous two years, but the decline in sales isn’t what makes the change so dramatic. The increase in the number of current listings, plus more new listings coming to the market, makes the sales gap much bigger.
Let’s break this down. In October 2017, there were 8,407 single family homes listed for sale in Denver’s MLS system, RE Colorado. In the same month, 4,459 homes sold, leaving 4,000 homes on the market.
Fast forward one year to October 2018. With more than a thousand additional homes for sale, the number of current listings sat at 9,460. Sales for October were five hundred units lower than the prior year at 3,949, leaving 5,500 homes on the market, a net difference of 1,500 more homes from a year ago.
Where Have All the Buyers Gone?
Based on the example above, it isn’t that the number of buyers has dropped so dramatically, but the number of sellers who have come to the market has widened the margin. Buyers now have more choices and the feeding frenzy has subsided, making the market “feel” different.
Rising interest rates have slowed buyers as well. Record high prices and higher interest rates have buyers heading for the sidelines hoping prices subside. Would-be homeowners are now leery of purchasing with the idea if they buy now, their investment will lose value over the coming months and years.
Frankly, there is some truth to this idea. Real estate is cyclical and there is bound to be a downturn in some form. But, with sellers realizing they have hit the top of the market and putting more homes up for sale, buyers have the opportunity to negotiate the purchase price.
Have Builders Caught Up?
Last month, The Uphoff Team at NFM Lending put on the Denver Metro Builders Panel & Expo, bringing builders and Realtors together to discuss the Denver housing market. According to some builders, they have not caught up with buyer demand in Denver, however, many builders talked about their “move-in ready” inventory currently available. This suggests they are actually closer to catching up to demand, especially with the slowdown in the resale market.
In the live panel session, builders did talk about their ongoing adjustments to meet the needs of the consumer. Instead of building bigger homes that continue to stretch the affordability of buyers, the panel discussed the need for more affordable housing and ways they are bringing it to fruition. Building costs continue to increase, with no signs of ever coming down. The proposed solution is smaller homes and the utilization of more vertical space (i.e. more levels) on smaller plots of land.
An Interesting Time
This is a unique time for both Denver real estate buyers and sellers. For the current homeowner wanting to sell, prices are still at record highs, with a lot of accumulated equity. The population continues to grow, albeit at a slower pace, keeping demand for housing up and making this a good time to sell.
For the buyer, a softer market is providing more choices. Although interest rates are heading up, they are still incredibly low. Home buyers have the opportunity to take a little more time, negotiate on price and get a good deal.