Right after the Broncos won the Super Bowl I wondered 1) if even more people would want to move to Denver and 2) if that sentiment would actually play out in Metro Denver’s real estate market. Let’s look at the stats, shall we? The weekends directly following the end of the Bronco’s last game show increased Buyer activity by 35-40% and in 2016 as whole, the number of units going under contract increased by 35%. Now, in light of the recently determined dismal future of the Broncos, I’m wondering if some folks think they may have made a mistake. But, let’s face it. Denver has a lot more to offer than just the Broncos.
Buyers shop with certain preconceived expectations and the real estate market is no different. Not to put words in their mouths, but here’s what many buyers are saying (either to themselves or out loud).
Expectation #1: I’m going to beat other buyers to the market by beginning to hunt for homes earlier in the year.
Reality: The market will remain in a state of “compression” through Spring Break. Buyers will experience bidding wars at median to lower price points. Many Sellers will wait until the week following spring break to list their homes. Plus, Buyers are already out and searching for homes and under contract activity has increased significantly.
Expectation #2: I want a deal. I’ve been searching on Zillow for homes and I see a lot of houses that are in pre-foreclosure- I want one of those.
Reality: Foreclosures and short sales remain low to non-existent as migration to Denver remains strong pushing sales prices higher. This is why investors are having a tough go right now. The distressed market currently sits at 2%, condos sit at 0%- there were 3 condo short sales in Feb. Buyers are hopeful of finding a home below market value, but mostly what they’ll find are bidding wars that will push values back to fair market prices or higher.
Expectation #3: I want to test the market. I don’t want to bid over asking price, let’s low ball ‘em and see what we can get away with.
Reality: Depending upon price point, homes in February sold anywhere from 95.7% (Luxury Market) to 101% (200-399K) List to Sold Price. The market shifted back in February to homes selling very quickly. And Sellers, if your home is on the market 2 weekends or longer it may be time to consider a price reduction.
Expectation #4: I want to take my time, and I can only look at homes on weekends.
Reality: The percentage of properties selling in 7 days or less is currently 47.4%. The historical average is 27.5%, the historical low is 5.3% (Dec 2010) and historical high 65.9% (May 2015). I lived this one with my clients and it was a doozy! The anticipated trend is an increase over the next 45-60 days, peaking in April.
Expectation #5: I don’t want to buy at the top of the market, because I think the “bubble” is going to burst.
Reality: As long as migration to Denver remains strong, the housing market will remain competitive. Unlike our last real estate boom, the current market is built on wealth and not credit. Inventory currently sits at 1.5 months, and a balanced market is 6 months. This number will continue to decline over the next 2-3 months, with the most drastic decrease over the 4-6 weeks post Super Bowl. The under $400,000 market is fueled by the two largest portions of our demographics; Millennials and Baby Boomers. These markets will remain competitive for Buyers. Move up Buyers will have a great opportunity to sell high and face less competition at higher price points.
So what should our next play be- so what?
Facts: The market is experiencing compression. Buyers are out searching but sellers are lagging. Through March until just after spring break, multiple properties at average price points or lower will likely experience multiple offers. The market will then loosen as sellers enter the market in late March to early April, but remain competitive through the summer months. Fear not- it’s just that Buyers must be prepared to compete aggressively. Bring it!