The weather isn’t the only cool-down happening right now. Home sales have finally fallen off the fevered pitch we’ve seen for most of the last 4 ½ years and will likely remain at this, more balanced, pace for at least the next 3-4 months, possibly longer. Market vitality, or “absorption” as it’s called in my data reports, has fallen off by 35% since early May. That’s welcomed news for the many prospective buyers that have been all but left in the dust most recently. One agent used the term “Buyer Fatigue” for the recent slowdown, which I think is a fit description of at least one of the factors involved. The buyer fatigue is from prices and interest rates rising together, faster than incomes, to the point many buyers just can’t mentally and emotionally catch up, even if they can financially. So, they just “drop out” for the time being.
Unfortunately, interest rates are expected to continue to rise, slowly but steadily, for the foreseeable future. That’s un-welcomed news for buyers and sellers alike. There is, however, some debate now about whether current inflation warrants more increases or not. I vote not! And yes, I’m partial. Another element at play is decreased migration into Colorado from other states for jobs, especially marijuana jobs. And the tremendous incursion of new apartments, all over town, has taken the pressure off rents in some degree, so at least one big segment of motivated, otherwise potential home buyers has some temporary relief there. But those resigned renters are still at a major disadvantage relative to those who managed to buy while they could. Rents go up when mortgage payments remain static for up to 30 years! For those who still truly want or need a house, vs. an apartment, the pressure remains, and prices will continue to rise, albeit at a slower pace than they have in recent years. One year ago, the median price of a single-family home in the Denver metro was $414,294 and as of this writing, it’s $444,167. That’s 7.2% appreciation, which is considered a healthy, but not inordinate, increase. That pace could even drop some without being indicative of an actual market correction. And that says that Denver is still a good market to buy anew, move up, and/or invest in rentals. Buying down is another story—a sadly difficult story. It’s very important to note that this all really just refers to the middle segment of the market. The low end is still white-hot, and the high end is softer than it’s been since 2012. Everything in real estate is relative! If you want more precise information, regarding specific market segments, just ask, and I’ll be happy to send you that data. Remember, knowledge is power. I have lots of current, relevant data, and 35 years of experience with which to evaluate it!
Here are some fun facts (or just some facts):
- 39 out of 100 single family homes in the 6-county Denver metro are under contract, down from 60 of 100 back in May.
- 32 out of 100 single family homes in the Jeffco Foothills are under contract, down from 47 of 100 back in May.
- The two strongest market segments in my downloads are Broomfield County Condos/Townhomes (64 of 100 UC) and Jefferson County 2-4 Unit Income properties (62 of 100 UC).
- The weakest market segments are Evergreen Vacant Land (11 out of 100 UC) and Luxury Homes metro-wide ($3M-plus at 10 of 100 UC)($1M- $3M at 20 of 100 UC)
- Luxury Condos, over $1,000,000 are doing surprisingly well! (59 out of 100)
- The median price of a brand-new home sold over the last 12 months is $621,000 compared to $443,000 for an existing home. (You can see how home construction isn’t helping much with Denver’s housing crisis.)
It was also telling to see that of my 77 datasets, the number in the Seller’s Market category fell from 22 in May to 7 in November and the number of Buyer’s Market datasets jumped from 34 to 46. These numbers are actually slightly improved over last month! The takeaway here is that the Denver metro real estate market is now more balanced than it has been for the last 4-5 years. And balanced is healthy. In balanced market segments, a patient buyer will soon enough find a home that works for their needs, within their budget, and a patient seller will, in a reasonable time, obtain a fair price for their property. Even so, one constant, regardless of market conditions, is that home buyers most often worry that they’re paying too much, and home sellers worry they’re selling too cheap. And while those instances do occur, in reality, it’s not very often. Markets are always in flux. You and I don’t get to control it. We just get to make decisions about how to maneuver within it. The key is to be armed with knowledge about the market reality in which you are endeavoring, and to have an agent that advises you well and knows what they’re doing with the myriad moving parts of a real estate acquisition or sale. With that, we’ll bid you Happy Holidays and Happy Homes!