Let’s begin with some stats. What you see is a market with increased inventory, very slowly returning to the long-term average of 6% per year price increase for homes & condos. By no means should we as sellers be overly alarmed, we are just coming off of a crazy strong sellers’ market. The increased inventory we have had the past few years or so is certainly what I would expect to be the precursor to a slightly cooling market. But a higher inventory of properties on the market will eventually lead to a market more favorable for buyers.
Average Sales Price: Condos have increased in price slightly faster than houses (over the past few years), 9.6% for condos compared to 7.2% for houses. Prices increased for condos 6% over the past year, right on queue. Prices increased 4% for homes in the past year, just a little below average. We expect to return to the normal 6% increase per year for both in the future. About 15% of homes were well-priced, meaning you need to see these properties first because these are the ones that always go under contract the soonest!
Months of Inventory (MOI): Months of Inventory is 1.9 for both homes and condos, very similar to where it was one year ago. As a matter of fact, it has been very similar over the past four years. Six months of inventory in the market is considered normal and balanced, so 1.9 months of inventory is still a very strong sales market (i.e. the averge home is selling a lot faster than six months). A well-priced home will go under contract almost immediately.
Under Contract (UC): Under Contracts give us a good idea of the number of sales we will have in our market. For both houses and condos, we have a very similar number of properties under contract this year as compared to last year. One thing that has gone really well for buyers is that interest rates continue to fall. Today’s interest rates are low, down about .90% from the beginning of the year. That is a great strength to our sales market as it makes the majority of home purchases (for those who get a loan to buy) cheaper since the interest rate is lower.
Number Sold: The number of units sold declined -3% for houses and -4% for condos compared to one year ago. In a market where the population is increasing about 1.5% per year this is slightly surprising, but is making the buy-and-hold investors very happy to rent out their units. What it DOES NOT mean is that we are selling too many properties. In a perfect world, more people should be buying homes to live in and fewer people should be renting their residence.
Inventory: Inventory levels of homes on the market are finally growing from historically low levels, especially for smaller homes. Inventory should have increased beginning 2013, but it is just now starting to increase (which tells us what a nutty market it was!). Home inventory on 7/1/19 was up nearly 25% from the prior year, and condo inventory is up nearly 60% (a majority of these being a part of the luxury market). All buyers are welcoming the increase. It is still a sellers’ market compared to a few years ago, but slightly better for buyers than it was in the past.
To put the inventory of homes for sale in better perspective from the past few years, take a look at the chart below. The light purple line shows the number of properties on the market every month going back to January 2007. The dark purple line shows the number of sales every month. What you saw during the downturn between 2008 and 2010 was an astronomical number of properties for sale (over 26,000 at its height!) which caused a huge buyer’s market and a crash in prices. Starting around 2010 and picking up in 2011, the inventory began falling and the market became super hot. Since 2012, there has been a dearth of properties on the market resulting in our strong seller’s market. This is exactly how markets are supposed to work, ebbing and flowing over time.
Now, what you can see from both the data in this Newsletter and the graphic is that recently there has been an uptick in the inventory – a small but noticeable rise in the numbers of homes on the market. As a matter of fact, 5,449 houses and 2,413 condos (July 1, 2019) on the market are the highest numbers we have seen in years. From the chart you can see we still have historically low inventory, but if the number of homes on the market continues to rise over time to the 15,000-17,000 mark, we will sooner or later return to a balanced market.
The last graphic I want to show you is a metric that Your Castle invented years ago which compares the average number of showings per listing per month (see below). Basically, the higher the number, the stronger the real estate market. A higher number means there are either more showings per month, fewer listings on the market, or both. The opposite is also true. A lower number means either there are fewer showings per month, more listings, or both, which translates into a weaker market. As you can see, the light purple line is just below where we have been the past few years. This suggests a strong sales market, just not quite as strong as the past couple of years – one offer already in instead of five, for example.
So, putting all this data together would suggest that the market may be a little weaker than years past, but it is still strong. No one (no matter what they say!) knows for certain what will happen over the coming months and years but you can rest assured we will be tracking the Denver real estate market closely and reporting back to you every step of the way. Please give me a call if you want to chat more about this. I am always happy to talk about our super exciting, ever-changing real estate market!