Homebuyers throughout Denver-metro continue to feel the squeeze of low inventory and high competition, and the questions I hear most frequently are “Where do we go from here?”, and “When will this end?”. As we head into Memorial Day weekend and the unofficial start to summer, the industry talk-on-the-street is that there has been a slight cooling to the air over the past week or two. The official numbers won’t reflect current changes until June and even into July, but showing traffic has slowed and houses are sitting on the market a few more days than in previous months, for certain price ranges. This shift might offer buyers a little breathing room. Below is a breakdown of how long it might last and how much relief buyers could expect to see. Spoiler alert: If you are considering selling, you might want to list before Independence Day to cash out on this hyper-competitive buyers market.
CURRENT STATE OF THE MARKET
Despite new listings for April 2021 being up 38% over the same time last year, the number of homes sold was similarly up, and pending listings increased 88% over last year. Of the 6,658 new listings that hit the market in April, 5,901 homes went under contract. We continue to see this virtual “sell out” of housing inventory each month, leaving very little to carry over into the next month. What is left is either over priced, in poor condition, or in an undesirable location. As weeks of inventory continue to decline in the Denver housing market, buyers are beginning to back out.
A SUDDEN COOLING
The first signs of market cooling have been anecdotal, but as I’ve attended market updates and office meetings, the conversations continue to show signs of change that the numbers do not yet reflect. I have personally seen more price reductions in buyer searches over the past few weeks than I’ve seen all year, and more homes have come back on the market due to buyers backing out of contracts for whatever reason. I have heard conversations about showings slowing for homes over $800,000, and no showings the first week for homes priced around $600,000 in certain neighborhoods. A month ago, I was staying up until midnight to catch “Coming Soon” listings that were scheduled to go “Active”, so that I could get the first showing. Things are changing quickly.
Another micro-example is an active listing in Denver’s popular Wellshire neighborhood. Homes in Wellshire typically go under contract in less than 6 days with an average sale price of $1,197,330 (3/1/2021-5/4/2021, recolorado). Despite being a competitively priced home in Wellshire ($945,900) and the only current active listing priced under $2M (as of this writing), this house has now been on the market a full week. With 50-70% of listings still going under contract in the first week, and more new inventory beginning to hit the market as vaccine restrictions lift and schools let out, this home offers a singular example of the market shift beginning to take place. If it is but a small sample of what lies ahead, this summer may offer a break in the madness that buyers have been waiting for.
MARKET COOLING OR MARKET COMEBACK?
The current indicators of a market cooling are homes priced too high, homes not staged or marketed well, or homes on busy streets starting to get passed over by buyers. The average home price continues to encroach on $700,000 in metro Denver and buyers are feeling spooked and fatigued. This shift in buyer confidence, fueled also by interest being diverted back to travel and leisure activities, is lifting some of the squeeze on demand. I am also seeing a trend of home owners selling and moving into rentals to max-out equity and wait out the market.
Although these changes are exciting and welcome, they are not a shift from historical, cyclical market trends. The chart below shows the trend in the odds of an active listing being sold in Denver since 2005. The odds of selling your home in Denver has continued a steady incline over the past 16 years, but there is a clear cyclical peak around May, followed by a downward market decline until January of each year. These numbers further show a drop in buyer activity over the U.S. 3-day weekend holidays: Memorial Day weekend, Independence Day weekend, and Labor Day weekend.
WHEN TO ACT
If you want to buy a house but are intimidated by this market, you’re not alone. Buyer activity is stagnating as more people want to spend their time and energy elsewhere. However, if you can stay focused and hit the ground over the summer’s holiday weekends, you may be able to find less competition and sellers who are caught off guard by a predictable market dip. Call me to discuss your personalized summer showing plan today.
Sherri Stinson is a Colorado Real Estate expert specializing in residential sales, new-build communities, and investment properties along the Front Range. Sherri helps both buyers and sellers achieve their unique home goals, and her nuanced approach offers a distinct advantage to her clients.
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