Some unfamiliar scenes have been occurring lately in Denver’s real estate world. Homes that are under contract are suddenly “active” again. Realtors who list homes write in the broker remarks that they are accepting offers only through the weekend and rather than going under contract Monday morning, the homes are sitting days or weeks past that deadline. And, price drops! The aggressive listing prices are being challenged and sometimes drop and drop, before our very eyes!
So, what is going on and is there really a “bubble” that might be ready to pop? Should all those folks who bought in the last three years be kicking themselves that they didn’t wait to purchase (assuming they had the luxury to wait)?
Actually, it is not unusual for the market to slow down starting in July, through Labor Day-ish. July is the most popular month for vacations and active listings stay on the market longer due to less focus on the home hunt and more focus on family time and school preparation. The multiple offer feeding frenzy is less frequent on just any home and the number of open houses and showings have decreased as well.
The truth is, we are still experiencing appreciation of homes- no doubt you have more equity in your home than you did even if you bought last year. Interest rates are still low for buyers. And, Denver still has low supply and high demand, which will encourage a competitive market. As dorky as it sounds, to understand the answer to “So, how’s the market?” you have to look at the data. Here are some interesting stats and economic trends that might help paint the picture of why the Denver Metro market is moving the way it is, and how it may remain boringly consistent for the recent future.
Factors that contribute to limited supply of homes on the market in Denver or surrounding areas:
- According to US News and World Report, Denver is the #2 place to live, just under Austin, TX
- 3% of Denver homeowners undertook home improvement projects in 2014-15. This probably means they aren’t moving any time soon. This is the highest rate of home improvements in the country.
- A home advisor survey discovered that Denver homeowners are the 3rd happiest in the country (how they determine this, I don’t know, but I’m pretty happy here!)
- Harvard University’s Joint Center for Housing Studies is predicting that homeowners 65 years old and older will account for nearly 1/3 of the total amount of remodeling dollars spent by 2025. This is a drastic change in longevity of homeownership and reinvestment in existing properties vs. moving up or down in home size.
- Median home ownership tenure has risen to almost 10 ½ years in Denver, up from 5 in just 2008.
- Older homeowners can’t downsize since over 200,000 adult children still live at home!
A word about housing starts/new builds:
- In 2014, builders built a total of 14,100 new apartments and homes. In 2015-16, they built 16,284 and 19,215 respectively. Meanwhile 182,000 people moved to Denver during that time. For a population increase of 182,000, we need 72,800 new homes and apartments. We’re not keeping up!
- A healthy real estate market has a new residence built for approximately every 1.5 jobs created. Between 2013-16, we created 191,000 new jobs. Our building ratio is one home to every 6.5 jobs.
And, a note about home builders:
- Big production builders are taking 10-14 months to build a new home- that is double to triple the time it took 10 years ago. That is what I am experiencing as I help buyers.
- Denver is one of the slowest counties in the country at approving construction permits- 8.2 months. Just spend some time in the permit waiting room in the county building, you’ll believe this stat. On second thought, don’t.
- Regulatory cost for homebuilders has increased 30% in the last five years nationally.
- We have a people shortage: according to CSU’s Department of Construction Management, Colorado currently has a shortage of 70,000 workers in the construction industry. This will grow to 96,000 in eight years.