A friend of mine, who happens to be a realtor, and I were chatting over coffee this past week. We don’t always focus on real estate (we manage to squeeze in our personal lives in this busy time of year) but we both brought up the fact that there’s a slightly different feeling in the deals that we’ve recently closed- there’s maybe a slight shift in Denver’s market these days. It could be the time of year- historically in July and August real estate activity wanes a bit- people are busy with summer, traveling, and gearing up for school. Or, maybe, the market is shifting a bit?
While on the MLS, I notice that there are actually a few properties sitting on the market for more than a few days, and when submitting an offer for my clients, there may only be 1 or 2 in the queue rather than 10-12. A handful of agents on the listing side are actually taking offers as they come in, evaluating them with their sellers, and countering or accepting the offer rather than collecting as many offers as they can over a weekend and then creating a bidding storm that leaves both sides exhausted and concerned that there may be a bumpy road ahead toward closing.
So what’s with this perceived shift that realtors may be feeling on the ground, working with clients day to day? And by the way, if this is not just a perceived shift but a real one- then HALLELUJAH (read below for implications on both the buy and the sell side). This could be a healthy change- one that would allow war weary buyers to finally find a home and sellers to feel more comfortable listing their home and not being homeless until they find a new one. A balanced market will be great for buyers who, over the past couple of years, have had to make concessions that have not always felt fair and great for sellers who are looking for a seamless home transition process.
With a dose of healthy skepticism, recognizing that no one can predict to the tenth percentage point the rate of appreciation in years to come, here are some highlights to consider about the numbers and some broad brushstrokes that more than one person can agree upon- see the Denver Post’s article for more detail: https://www.denverpost.com/2016/07/24/what-is-high-plateau-and-what-does-it-mean-for-the-denver-housing-market/.
- A slump like the one we experienced from 2007-2009 is not on the brink (see my blog about the housing bubble, https://lindseyfriedmanhomes.com/2016/06/27/are-we-headed-for-a-new-housing-bubble/
- Real Estate Economics, based in Orange County, CA forecasts a 5.4% appreciation gain in median home prices in metro Denver this year with declines as well in 2017 and 2018. For reference, gains averaged 12% from 2013-15.
- Prices will remain strong as long as the developers and builders continue to put out too little supply which affects overall inventory of homes for sale. The Denver Post article notes that Metro Denver historically has supplied a new home or apartment for every 1.2 jobs- we’re now at one housing unit for every 5
- If retirees are convinced that the market is shifting they may put their properties up for sale sooner rather than later to down size and cash in on their existing equity in their homes. More homes may become available soon!
It will be interesting to see how appreciation ends up this year. Maybe home prices have finally reached the threshold of what incomes here can afford- even at these low mortgage rates. So what are the implications for…
- Multiple offer craziness and properties flying off the shelf is becoming less widespread. However, if it’s an obviously amazing home, in a highly sought after neighborhood, where listings are few and far between, there still could be a bidding war.
- Analysis of recent market history is smart, but, we have to be present! The best indication of current market conditions is what happens when your property goes active and we begin to monitor showings, gather feedback, and maybe adjust the price.
- For whatever reason, the market in a particular price range and neighborhood has made an overnight change- if your neighbor received multiple offers last week, you may not have the same experience.
- Sellers need to remain flexible on inspection items and appraisals. If the first deal dies, we can’t assume that there will be another buyer in the wings with a better price and terms.
- If you were intimidated by the multiple offer craziness a while back you may want to jump back into the ring. Also, you may have the opportunity to write a more “normal” contract without waiving or limiting inspections and/or appraisals.
- Rates remain low- you may be able to buy for less and build equity rather than paying rent
- Prices will continue to increase but probably not in the double digits.
- Use your real estate agent- when you find a home you want to purchase, make sure he or she calls the listing agent, builds a rapport, and asks about the activity on the home- you may not need to even offer full price if the property’s been sitting a while or showing activity has been slow.
- Just know time is your friend. It’s been rare in metro Denver for average prices to be lower at the end of a 5-7 year ownership period than they were when you purchased the home. If this is a 1-3 year purchase, the probability that the home goes down in value is much more likely.