The two most frequent questions I hear from people who know I’m a real estate broker are “How’s business?” and “How’s the market?” When it’s the first question, I don’t usually get into too much detail, and it’s really kind of boring anyway unless you have an actual interest in the real estate business. I could always be clever and say “Business is good,but I’m never too busy for you or your referrals” like the sales trainers teach us. My friend, Christine, would call that smarmy. Now, if I’m talking to a mentor, a mentee or another broker who is ready to trade war stories, then I might engage more specifically. Otherwise, that question is usually little more than an icebreaker and a gracious invitation to confirm that things are going well for me. So, “Very good. Thanks for asking” will suffice enough for me to then inquire similarly into their world, if conversation is what we’re seeking. Because truthfully, being the introvert I am, I don’t love talking about myself. Still, I’m always mindful of a simple truth that I once heard, and it stuck with me. That truth is, “A real question deserves a real answer.” That statement is all the more apropos when applied to the second question, “How’s the market?” The old sell-anything-to-anyone school of sales training would always answer with “Fantastic!” But, talk about smarmy! I know I’ve written about this before, but it’s worth putting it out there again… to the question “How’s the market?”, there is only one true answer. “It depends.” If you are trying to buy your first home, most likely it sucks! If you are trying to sell your first home and buy a new one at double the price point, it’s a pretty great market. If you are trying to sell your $2,000,000 home and downsize to a very nice $700,000 home, you won’t love your odds. And there are lots of points in between. This brings me to our title topic of the Line of Demarcation or LOD. This isn’t an industry term, but one I’ve adopted myself to describe that line below which is a seller’s market, in degree, and above which is a buyer’s market, also in degree, relative to how far above or below. Confused yet? The closer you are to that line, the more balanced the market is for you and the product you’re looking to buy or sell. The product, in our case, is predominantly a home, but could also be a rental property, land or other commercial real estate. Another relevant indicator, and my favorite measurement of market vitality, is absorption rate. That is a simple ratio of demand over supply or, in the case of homes for sale, it is the number of available homes currently spoken for, or under contract, divided by the total number of homes on the market. The simplest example would be if there are 1000 single-family homes available in all of Jefferson County, and 500 of them are under contract, then the absorption rate is 50 percent. By the way, there are actually only 566 available, and 960 under contract, so actual Jeffco absorption is 62.9 percent! However, that market segment that shows a 50 percent absorption rate does not indicate the Line of Demarcation. That would be too easy. In reality, 40 percent absorption is where the mid-point lies of a balanced market. The full range of a balanced market would be, by my estimation, a price range or other data set with 35 to 45 percent absorption. The explanation for why that is is longer than I can write about today, but feel free to ask me when you see me. I’d love that conversation starter! On the absorption rate scale, 100 percent absorption is a screaming hot seller’s market, and 0 percent absorption is a buyer’s paradise. We are rarely running into either. What’s critical about these measurements is how they apply to your particular market segment. Let’s now talk about your market, shall we? If your market of interest is to buy a single-family home anywhere in the Denver area for under $427,000, buckle up! That is the median price of a home in the Denver area and you can expect competing buyers for almost any home you try to buy. That is, unless you want to hedge your bet by looking in Adams county where the median price is $326,000. Note that those median price points are not LODs. That’s because with many homes selling well over asking price, relief doesn’t come for buyers until they’re at least 40 percent over that medin price point. Case in point is that the metro Denver, single-family data set for which the median sales price is $427,000, also has an absorption rate of 60 percent! The balanced market doesn’t begin until you get to $550,000 in price for a detached single-family home, or $450,000 for an attached single-family (condo/townhome). It’s easy to see why Denver is in the midst of a housing crisis! Every month, I pull down 79 different data sets including eight counties, five property types and a variety of subsets like foothills and luxury homes. Let me give you some quick market numbers, then I’ll illuminate the Line of Demarcation that’s most relevant to this readership.
The Denver metro median home price is now $426,568 compared to $399,201 a year ago. That’s (only) a 6.9 percent increase in this super-hot market, so that should quiet the doomsayers about any real estate bubble in Denver for a long time. Average time on the market is basically unchanged at 28 days. The percent of asking price was 100 percent a year ago and is 99.9 percent now. I predicted 2018 would be little more than a repeat of 2017 and so far, that looks accurate. In contrast to metro Denver’s 60 percent absorption rate, the Jeffco foothills absorption rate is 46.6 percent. That’s just north of a balanced market. Foothills days-on-market is exactly double Denver metro, and we average 1.4 percent less of asking price. No valid complaints really. But here’s a little local shocker: The median price of Evergreen homes south of Bear Creek is $160,000 less than homes on the north side. That used to be $100,000. The Line of Demarcation for metro Denver is $600,000 if you are an average home buyer. If you are among Denver’s upper class, you’ll look at a nearly $2,000,000 LOD. In the foothills, those two LODs are $750,000 and $1,500,000 respectively. Yes, there is disparity. Conifer LOD in general is $640,000. Yeah, wow! Bailey LOD $500,000. I dig numbers. Can you tell? They speak truth to me in a world where truth is hard to find. They also stimulate my curiosity and, in the case of these data sets, they illuminate things I consider very intriguing. And if you’ve read this far, then I guess you might be the same. So here are a couple interesting, parting tidbits. Jefferson County 1-4 unit income properties are the hottest market segment right now at 89.3 percent absorption, beating the former leader, Adams County condos/townhomes now at 82.2 percent absorption. Cold spots include land in Evergreen at 10.8 percent absorption and homes over $1,000,000 in Genesee/Lookout Mountain at exactly 10 percent absorption. Fascinating, right? If you have questions or comments, I’d love to hear them. The KC Butler REMAX “Home” Team wishes you Happy Homes, always.