Another month rolls in with a familiar story line for Denver Real Estate. Low inventory and high buyer demand are driving record breaking numbers. The current active listings represent the lowest number we have seen in any September, by nearly 2,000 units. For detached single family homes, that number is a mere 3,000 homes, down 8 percent from August and 50 percent year-over-year.
Generally, the fall brings a lull in buyer activity and active listings. However, with people spending more time at home, a high percentage of kids virtual learning, and the influx of people moving to Denver, it appears that will not be the case this year.
Low Real Estate Inventory Across the City of Denver
There are several reasons for the low inventory. Sellers are equity rich, with the ability to ride out any short-term fluctuations that may happen in the market. Many are clinging to this comfort in uncertain times.
On the other hand, while many are aware of the strong “seller’s market”, their concern lies in where to go once they sell? Record low interest rates, people spending more time in their homes, and changes in how we are living are leading buyers to expand from the city center. Today’s buyers are craving more space since they are spending the majority of their time at home.
Luxury Real Estate Market Surges!
The Luxury Market ($1M+) is in a year of resurgence. We have seen an 80% increase in sales of luxury homes. With an influx of transplants from expensive cities like San Francisco, Seattle, Portland and New York, buyers do not have the luxury of time on their side. The average days on the market for luxury homes is 46 – nearly 40% less than a year ago.
The Ultra Luxury Market, those properties valued at the $3+ million, have two years of inventory. This is attributed to the fact there are only a handful of sales in the $3M+ range each year.
Signature and Premier Markets Hot!
The markets showing to have the most activity is the Signature and Premier Markets. As Drew Morris, a member of the Market Trends Committee, states, “if you are an agent of a consumer navigating the Premier Market, know that what you’re experiencing out there right now is truly remarkable. It can be frustrating for home shoppers, but keep your head up and spirits high. Those who persevere will find success.”
Year-to-date, the Signature Market ($750k-$999k) is boasting a 20% year-over-year increase in sales, with over 2600 units sold. At just over 3 months of inventory, the detached homes in this price segment seem to be a little more balanced. Buyers are willing to pony up the dough quickly, however homes must exhibit proper price, location and condition before they will pull the trigger. After spending an average of two months on the market, 25 percent of closed homes needed to make a price reduction before selling.
Low Interest Rates Continue to Fuel Market
The Premier Market ($500k-750k) continues to be fueled by low interest rates and favorable conforming loan limits. With the average home in Denver proper being $650k, this segment represents the largest in sales volume, accounting for 10,000 of the 30,000 sales, year-to-date.
Currently, the Denver conforming loan limit is $575,000. Conforming means a bank or mortgage originator can sell the loan directly to Fannie May or Freddie Mac. Then they can recover their cash to go out and make other loans. These conforming loans only require 10%, 5% or even 3% down payment.
Buyers who wish to put less money down can take advantage of the low interest rates with the power of leverage. If a buyer is putting 10% down, they are able to purchase a home up to $638,000. For prices over that, either additional down payment or a Jumbo loan is required for purchasing. This simple explanation is one of the reasons why we see so much competition with only 2-3 weeks of inventory!
Austin, with a hiring rate up 7.4 month-to-month, and Denver, at 4.7%, are both leading cities in the recovery. Both were also gaining the most workers as more affordable and growing cities pre-COVID-19. Wall Street Journal shows only 3% nationally are underwater, a 10-year low. Denver ranked 6th in City-wide presentation among large cities in jobs retained. Phoenix was #1 at -4%, while Denver ranked at -5.6%. The worst was New York City at -13%.