What Now?
Where do we go from here? After experiencing a hot market season like the one we just saw, and then feeling what many believe to be a shift, what should we expect?
Isn’t this the question we are all asking? NOW WHAT? Is the market going to tank? Can this sustain? Are values going to continue sky rocket? Truth is, nobody has a crystal ball. We can all speculate but only time will tell. So why read on? Ha! Because we are Real Estate Experts, professionals, and we also have ideas and opinions to share that are worth the read!
In August DMAR (Denver Metro Association of Real Estate) released stats year over year. The stats show that homes closed in the Denver metro in 2020 was tracked at 6,615 homes closed, in 2021, that number went down 11% to 5,894 homes closed. Beyond that, the average closed price in 2020 was $538,035, and in 2021 the average close price on a home in the Denver Metro is $613,656. Up 14%. To add to these stats a couple more that you should also take in consideration are that new listings to the market are down 11% from 2020, Average days on the market are down 13 days in 2021 to 11 days on the market on average, and lastly, in 2021 the weeks of actual inventory is down 1 week from 4 weeks to 3 weeks. So what does this all mean and why should you care? Because this is showing the market shifting. We have not seen a market in the Denver Metro like the one we saw this past spring/summer 2021 in a very long time. Here is what we have to look at in order to view the shift.
Yes, more stats. It is super important to see and understand that even though the stats from August 2021 seem steep and hard to image. How about taking a look at June and July 2021… Here is a quick snap shot… In June 2021 homes closed was up 4% instead of down, the average home sold was $642,167 up 21% from June last year in 2020, new listings were up 4%, and there was only 2 weeks of available inventory. Now let’s peak at July 2021. This was a rough month for the market. Homes closed according to the Realtors Association dropped to 17% the average home price was $622,092, and new listings went down 6%! This means that the market was lacking enough inventory to appease the amount of Buyers in the market buying, which in turn directly affected the pricing and purchase power.
I will quickly describe what this looked and felt like for buyers and sellers. CRAZY! For both sides and here is why. Let’s pretend that you are a buyer ready and willing to purchase a home! You have found the perfect Broker to guide you, you are preapproved, and out and about looking to find your dream home! Your fairytale about how this would go probably came crashing down to a very real and very frustrating reality. As a buyer you were faced with only being able to see each home for a 15 minute window of time before you would have to decide if it was “the one” to write an offer on. IF you did find “the one” so did about 25 other buyers. OUCH. After that piece of the process was realized, you would have to write an offer pretty much waiving all of the standard contingencies in order to compete, you would also have to consider writing in an escalation clause stating you are willing to go over and beyond the top offer by so much up to a certain amount! OMG are you exhausted yet? A lot of buyers got that same emotional wear down, especially offering up everything they could minus their first born! Please understand this is not to scare you out of buying a home, because the moral of this side of the story is that at this point where we stand now, this is no longer the market we are seeing, rest well! (Also…. Side note…. the importance of having the right Broker to represent you in this kind of a market is a make or break!)
Ok, this time I wont promise that it will be a quick description because I don’t want you to miss the process! Ok, now our pretending will allow us to act as a seller in this kind of a market. The market here and still to this day is what we consider a Sellers market and the reason for that is the supply and demand chains and trends. There are still more buyers in the market to buy than there are homes to purchase. Ok so its July 2021 and you are selling your home. Again we can not stress enough how important it is to have the proper professional representation even in this market. We saw plenty of home sellers trying to go the FSBO route and fail miserably! At this time in the market as your Broker we would probably ask you as the seller to allow us the free rein of the home from Friday to Sunday. The expectation set is that there would be sooooo many showings that it would be less stressful for the seller to take a little weekend getaway than to have to leave the home every 15 minute (remember the buyers situation where they only got 15 minute time slots…). Well here is where it gets interesting…. go back and look at what we said it took the buyer to be able to put in a competitive offer. As a seller although it must sound dreamy to get 20 offers over asking and be able to choose the one you like best, that’s not the whole reality. Sellers were in fact getting around 20 offers only showing their homes from Friday to Sunday and asking all offers to be in by Sunday at 5pm for a Monday 2pm offer acceptance deadline. Huh? What does that mean? Truly when you get down to the nitty gritty, it means that that seller has from Sunday at 5pm to Monday ay 2pm to review and pick the “right” offer. For those of you who have never been in this situation, take it from us it is no easy task. What if the offer you choose is not actually the best one, what if you fall out….. So now that you have been displaced for a weekend, you come home to “Real Estate Homework”, you have a deadline to meet and 100000000000 buyers waiting on you! Stressful yes, please have the right Broker! The things we were seeing buyers offer, and disclose were unbelievable and in some cases unethical! Did you know that as a Seller you are obligated to also act in good faith, and in a fair manner. Do you think that is possible in this situation, the short answer is yes however, it takes a ton of discipline and guidance. Unfortunately for many buyers and sellers some of the actions taken and conversations had are causing legal issues for them now. We dont want you to be caught in that. Listen closely again, we are by no means telling you not to sell you home, again, this is not the case at the moment but be ready for when history repeats itself!
That was a lot. And please allow us to say, not all buyers and not all sellers had these exact experiences. With well rounded, knowledge based, experienced Brokers they may have had a more smooth, and flowing successful transaction!
Coming back to the market and where we are now. Buyers and sellers are experiencing a much more balanced and “normal” market. The market is not normal by any means but what we think we are seeing and feeling now is the difference between an unsustainable market and one that may be shifting back to a more balanced market. The $1 million question is, what now? With interest rates for buyers staying relatively low, and Sellers becoming more aware of the importance of pricing well, the market is stabilizing. We do not believe a crash is on its way. The facts show a shift, they also show that the comparison to 2008 is not justifiable due to the increase in property equity and long term homeowner home values. We believe that what we should do is stay well aware and educated each step of the way and in turn educate you all as well! Know the numbers, see the trends as they arrive, and listen! The Denver Metro Housing Market has a solid foundation and extremely large growth patterns. With large businesses coming to us, the economy of our great state will continue to flourish, and the hope that we have for you all and the market is that we continue to find balance, we continue to see stability, and that all of you potential home owners, and home sellers indulge in to this amazing market, grow your own equity and ensure that you are in the know and well represented! It comes down to your motivation, your timing, and your knowledge base. As long as we are on this earth there will be homes to purchase and homes to sell. After all this is the American Dream!
Stay Stable. Stay Strong. Stay in the Know. Stay well represented. Be successful. Be excited. Be ready. Be You!
