Has a cold front set in on the hot Denver subway real estate market?
The Denver metro area real estate market has undergone a shift in recent weeks, much like a cold front that ends a period of record heat, and it could bring significant relief to buyers if it continues, according to the reports. local real estate agents.
âThe market has started to move over the past two to three weeks and has been very visible to most agents over the past seven days,â said Bret Weinstein, Founder and CEO of BSW Real Estate in Denver. “There is absolutely a market shift happening.”
While a popular ad could have drawn over a hundred screenings and 15-20 serious offers earlier this year, now even a “super affordable property” could see 30-40 screenings and three to four offers. , Weinstein said.
Certainly, at any point before the pandemic, this would still represent a robust sellers’ market. But for buyers tired of bid after bid and losing, any type of temper will improve their chances of landing a home.
âIt’s always a very tough market for buyers – it’s been an exhausting market,â said Brady Miller, CEO of Trelora in Denver. âFor the past two weeks, we have seen signs of relief. We don’t see 12 to 15 deals. There are more houses on the market and prices are stabilizing.
The slowdown isn’t just happening in Denver. Time display, which manages the screening schedule for more than 1.5 million active registrations, saw a significant drop in screening activity in May compared to April in 28 of the 30 cities it tracks, including Denver.
âAlthough the traffic display continues at an historic rate, we have seen a substantial month-over-month drop from April levels,â said Daniil Cherkasskiy, chief analytics officer for ShowTime, in a statement. “As we said last month, even if demand starts to weaken, we will still be a long way from a buyer’s market as demand for real estate remains at an unprecedented level.”
Weekly projections in Colorado, which rose more than 50% in April from the first week of January, nearly stagnated in late May. They rebounded in June, but the rate of increase is only about 20%, a fraction of the typical June increase in projections from January, according to ShowTime.
In addition to making it easier to secure a niche for a visit, buyers should also begin to notice a greater selection of homes to choose from and the ability to view a property more than once before deciding to make a listing. offer. And they will have less competition when it comes to bidding.
âOver the past two weeks, we’ve seen 3,600 new homes on the market, which is the biggest increase in supply since the pandemic,â Miller said.
But he concedes that the number of new registrations was not as much of the problem last year as the absorption rate or the share of registrations claimed. This year, through the end of April, 95% of new listings were absorbed, which Miller said is “outrageously high” compared to a more normal absorption rate of 60% to 70%.
The absorption rate fell to 84% in May and is approaching 74% in June, which Miller called much more reasonable.
Weinstein said the larger market does not seem to be aware of the change that has taken place, given that the three bids a house could on average are as strong as the 15-20 generated earlier this year. Frightened buyers, either out of habit or out of desperation, continue to unnecessarily drive up house prices against phantom competitors.
âCurrently we see the best offer winning $ 20,000 to $ 30,000 assuming there are other offers at that higher price when in reality there are none,â Weinstein said. .
Another sign that the market is moderating is that fewer valuations are falling below the price the seller and buyer have agreed to, said Nicole Rueth, production branch manager of The Rueth Team at The Rueth Team. Fairway Independent Mortage Corp. at Englewood.
When buyers are willing to bid well above the list price, appraisers can struggle to determine a home’s fair value, which in turn makes it difficult to approve a mortgage.
About two months ago, 27% of Colorado’s ratings were low, Rueth said. In June, the share of below ratings approached 10%.
June is typically one of the strongest months for home sales, and price increases can peak around the July 4th holiday or beyond. So, what is the reason that the Denver market is running out of steam in May?
For some people, the urge to socialize and travel after restrictions were relaxed may have distracted attention from finding accommodation, argue Weinstein and others.
Wells Fargo Senior Economist Mark Vitner adds that as more employers recall workers to the office, the lure of moving to Denver to work remotely or buying a second home in a Colorado resort town could fade.
âWith people now considering returning to work, we are not seeing an increasing number of people leaving the West Coast,â he said.
Vitner and others argue that affordability has become a hurdle for the residential market after steep price hikes erased the advantage that last year’s sharp drop in mortgage rates offered in terms of lower payments.
âYou can’t see the prices going up 20% a year. These price gains are not sustainable. Income does not increase near that and interest rates will not go down. Affordability is a real challenge in many parts of the country, âhe said.
And Denver’s frenetic metro market may have simply caused more potential buyers to burn out.
âI think what is causing the drop is high price fatigue. Disappointed buyers and their brokers give up, âsaid Tom LaRocque, associate broker at Your Castle Real Estate, of the drop in visits, which he started noticing in the second half of May.
Other breaks in the market over the past year have proven to be temporary, and it’s entirely possible that more buyers will return to the game, causing things to ramp up again in August or beyond. But if the available housing stock starts to increase, the trend could have legs.
About one in five potential sellers cite low inventories of homes to buy as the main reason they have delayed listing their properties, according to a Homes.com survey. Just under 22% each said their homes were just not ready to be on the market or were waiting for a better time to uproot their families, while a tenth waited for the pandemic to end.
A quieter market, in theory, could make potential sellers more willing to list their homes, thereby increasing inventory. The trend could be self-reinforcing. Still, it won’t take much to heat up the market, given the limited supply.
âKeeping in mind that we have around 2,000 homes on the market, we only need around 10,000 buyers in a city of 3 million people to have five buyers for a home,â Weinstein said. . âBut for nowâ¦ the change is underway. For sellers who think the market is going to keep going up forever, this is not the case. “