What do you need to know about the Denver real estate market and why is my neighbor's house taking so long to sell? You thought it'd happen in a weekend, didn't you? It still might, but the Denver real estate market is unique and subject to things beyond the seasons. Here are five things to keep in mind.
1. Summer Market Cooling Down: Showings were down over this time last year, which means homes are not selling as fast in that furious, multiple-offer frenzy. If your house has been on the market for a long, long time... like two weeks, there's a reason. What does this mean for the real estate market and for you? Well Sellers will have to adjust their expectations and sometimes their price, and Buyers may have better luck out there after a harrowing springtime of competing offers. May be a good time to take another look.
2.Average Home Price: The average price of a single-family home in metro Denver leaped up another 11 percent in the past 12 months. This being said, here's another trend I'm seeing: lots of price reductions. I know, right? I'm not sure why this is happening but here's my suspicion. Sellers see the statistics and get excited about the strong market and their Agents either follow the wishes of their clients rather than educate them as to proper pricing, or are over-shooting the mark from the beginning. It's as if they say, my neighbor sold her house for $450,000 and the market's gone up 11%... let's list it at $495! But that's not how market appreciation works. It is an organic process, driven by what a buyer will pay for your home. Pricing your home correctly from the outset is key, otherwise you are looking at losing your strongest real estate market impact (the first 10 days), taking a longer time to sell, and potentially having to readjust the price.
3. Inventory: I believe 2016 will continue to play out very strong because the number one driver of home price change is the amount of inventory on the market. Our market inventory continues to be near record lows, with only 6,246 single family homes on the market as of June 30. However, there is a glimmer of hope for buyers because this is 12 percent more inventory than there was a year ago. Are sellers starting to put more property on the market for sale? Will this begin to satisfy the overwhelming demand we've seen from buyers the past several years? Will the market begin to move to greater balance between buyers and sellers? Only time will tell and it's still way too early to predict. What is certain is that until more inventory returns to the market there will continue to be tremendous upward pressure on prices as demand continues to outstrip supply. And where will the new supply of home inventory come from? It won't be bank-owned properties or shortsales. Denver currently has the lowest percentage of distressed (bank-owned and shortsale) properties among the largest 25 cities in the U.S. The metro Denver economy is strong and unemployment is low so there will be very few distressed properties coming onto the market for the foreseeable future. The additional supply will eventually come from homeowners who finally realize what a great market it is to sell and decide to put their home up for sale. When this will happen in earnest is anyone's guess. We've seen very little evidence of homeowners making this realization so far despite the uptick in June's inventory. Sooner or later though additional inventory will begin to appear. That's your sign of a changing market. But this might take several more years which is why prices will continue to rise strongly in the meantime. Stay tuned and touch base with me anytime you like so I can keep you posted with the most current data!
4.Number of Homes Sold: Because there is so little inventory in our market the number of single-family homes sold is actually going DOWN year over year, not up. There were 14 percent fewer homes sold in June 2016 than June 2015 simply because there is so little inventory on the market.
5. The Investor Market: Denver is still a great place to invest in real estate. The fix and flip market is strong for those who can find under-priced homes to buy and repair. They're out there but it takes tools, patience, and work to find them. Once you get one fixed up, selling is the easy part because of the lack of competing inventory. The buy-and-hold market will continue to be extremely profitable for long-term investors. Interest rates and vacancy rates are still near record lows and rents continue to increase - a record 11.4 percent per year the past three years. It's not difficult to buy a rental property in today's environment and put it on the path to be paid off in 12-15 years. Just think how your life would change if you owned a couple of rental properties free and clear! For building long-term wealth it's tough to compete with rental property ownership. That's the one thing that will never change.
Tracy Shaffer is a licensed Realtor with Your Castle Real Estate, serving the Denver Metro area.