Inventory Rising, Prices Slowing Down
- Listing Inventory is 9.1% higher today than 12 months ago. Normally we would see an increase of inventory as the housing market heads through the summer and a typical number is 6% growth in inventory from July to September
- The number of properties sold YTD is 1.1% higher than this time in 2018.
- The average price of a home in August of 2019 has increased 3.2% over August of 2018. This pace of appreciation is now flattening to normal market levels of 3% per year.
- Average Days on the Market is 30 days which is higher than the 23 days on the market this time last year. This stat is very price sensitive as $400,000 homes are moving significantly faster than $1.5M dollar homes. Know your price range to better predict the time on the market.
- The number of homes under contract has decreased five months in a row but still higher than last year by 5.2% from one year ago. This is an interesting trend where the year over year number is better than last year meaning that interest rates have brought some buyers back to the market.
What Does this Mean for Denver Real Estate?
- The slow increase of the housing inventory is a result of three factors:
- Many homeowners have obtained 4% or lower interest rates on their homes and are comfortable with the payments they are currently eliminating themselves from adding their home to the market, hence not as many home entering the market.
- Financing is still a magic act for some. This causes fewer buyers to enter the market which elongates the time for listings to stay on the market.
- The appreciation of prices over the last 24 months causes current homeowners to hold off from selling as they may not be able to replace their existing home with what they want.
- The number of sales for 2019 will a tad lower than 2018 by 1-2% as we close out the year. Fewer buyers are entering the market today.
- Fewer Buyers entering the buyer pool will cause pricing to slow down to a 2-4% appreciation rate over the next 12-24 months.
- Buyers can be less committed to close the transaction they have entered for fear of inspection items, paying too much or future job concerns. This causes more fall out of contracts and when this occurs in a declining buyer pool market there isn’t another buyer waiting in the wings, causing days on the market to increase.
- Different Price Points and Different Locations react differently in the Denver market. Understanding your neighborhood with accurate supply and demand sales will give homeowners a better picture for your specific home.
What Should Buyers Do in Today’s Market?
- Absolutely, Positively, be Pre-Approved for Purchasing. Do not change your financial position during the buying process as loan approval is really checked and re-checked right up to closing on your new home. In other words, do not quit your job or go out and buyer a big ticket item before closing.
- With the prediction of less appreciation in price over the next 2 years, try to gather enough money for 20% down payment if possible. This will reduce your payments as to eliminate the use of mortgage insurance and will insulate your purchase price in the event you choose to sell in the next 3 years.
- Consider pre-paying your principle or going to a 15-year mortgage. Creating a scenario of more equity will give you more flexibility down the road.
What Should Sellers do in Today’s Market?
- Condition, Condition, Condition. As prices have risen, the buyer pool is expecting upgrades and better conditioned homes for décor and mechanicals. Before entering the marketplace, improve the basic areas of kitchen, baths and service mechanicals of the home.
- Do not get overly aggressive with your price as the home will still need to appraise. It’s better to get a fair market value price quickly than try to wait on the market and negotiate to a lower target. This will reduce buyers to your home.
- Remove any barriers to sale, by getting pre-approved for you next home before you put your home on the market. The mental security in knowing you can purchase your next home, gives you a better negotiating position when selling
All data taken from REColorado on September 12, 2019 for the 8 county Denver Metro Area.