What Do Recent Changes Mean for Buyers and Sellers?
As a REALTOR® for more than 15 years, I’ve seen many seasonal ups and downs in the Denver metro area real estate market. And I’ve seen some surprises, too. I wanted to share some of these with you from the June 2019 Market Watch report issued by REColorado. (REColorado is the largest multiple listing service in Colorado.)
Let’s look at each of these statistics and examine what they mean for buyers and sellers.
Home Sales are Down; New Listings, Inventory, and Contracts are Up
8% Fewer Home Sales in June 2019 vs. June 2018
A total of 475 fewer homes sold in June 2019 compared to June 2018. That’s a drop of 8% year-over-year. It also happens to be 8% lower than the previous month. Year to date, home sales in the greater Denver metro area are down by 1%. What’s behind this year-over-year drop? Personally, I’m seeing a dip in buyer activity and I think it’s tied to a dip in rental prices. People who are renting and are on the fence about buying are feeling less pressure to act, particularly in light of the high asking prices they see. I’m also seeing a lot of relocation out of the metro area. Many of my clients over the last 24 months have moved to Colorado Springs or to Arizona to get away from what they consider to be an overpriced market.
More Inventory = Less Motivation for Renters to Buy
It’s no secret that summer is one of the most popular times for sellers to list their homes and for buyers to look for homes. We certainly saw that in June. New listings were up 1% in June compared to last year. Those new listings added a full two weeks of inventory compared to last year, moving from 5 weeks to 7 weeks. (Inventory is the measure of how long it would take for all of the current homes on the market to sell, given the current pace of home sales.) In addition, the number of homes under contract jumped 12%, from 5,744 in June 2018 to 6,417 last month.
Buyers Pushing Back; Sellers Starting to Yield
When you take the jump in homes under contract together with the drop in home sales, it indicates that deals are taking longer to close. One thing I’m seeing is tougher negotiations over inspection items. Many buyers are not backing down when they see potential issues. It’s not unusual in these cases to sales falling through and homes coming back on the market. In some cases, too, sellers are accepting less-than-perfect offers (either contingent or with riskier financing than we’ve seen in years past); these can also cause a delay in closing timelines.
Average Days on Market Up by One Day; Much Variation by Price Range
How long does it take for a listed home to sell? In June, sellers could expect their homes to be on the market for an average of 32 days. That’s one day longer than in June 2018. That average spans a wide range of days on market, with lower-priced homes selling faster and higher-priced homes taking longer. As you can see in the chart above, days on market in June varied from a low of 20 days to a high of 72 depending on price range.
For buyers, this chart shows that in certain popular price ranges, it’s essential to move quickly and get your offer in when you find a home you like. Those homes aren’t going to wait around.
For sellers looking to price around $500,000, this chart shows the impact of smart pricing. Let’s say you were thinking of listing at $505,000. You certainly could…but it could take an average of 9 days longer to sell. A better strategy would be to list slightly under market value (e.g., $495,000). This would ensure your home is considered by a greater percentage of buyers and is more likely to lead to an over-list offer and a quicker sale. (See my blog from June 27 on competitive pricing for more details.)
Average Sold Prices Up 2%…Be Sure You Understand “Average”
Average sold price is one of those statistics that people like to grab on to, because they think they know what it means. Most times, though…they don’t, really. For example, the average sold price for detached homes in the greater Denver metro area was $549,656. Many people will look at that statistic and assume that the typical detached home sells for close to $550,000. That’s not accurate. The 4,128 detached homes that sold in June 2019 sold with prices ranging from under $200,000 to more than $2,000,000. The $549,656 average is calculated by adding up all of those sold prices, then dividing by the 4,128 sales. You can easily see how even just a few sales at that higher end can skew the average upward.
A more informative statistic is the mode – the value that occurs the most frequently. Unfortunately, REColorado doesn’t report the mode. But we can get a good sense for it by noticing that in June, 50% of all homes sold were priced between $300,000 and $500,000. We can’t tell how many homes sold closer to one end of the range than the other. But we can know that in June, most buyers in the greater Denver metro area paid something below $500,000 for their detached home or condo. This, at least, is an informative statistic for both buyers and sellers to be aware of.
Is It Time for You to Sell or Buy? I’d Love to Help!
If it’s time to buy or sell a home, I’d love to help you! See what my clients are saying about me and then give me a call at 303-204-6494.