DETACHED HOUSING INVENTORY COUNT REMAINS AT 30-YEAR LOWS
The top story in real estate this year is an extreme lack of homes for sale across the nation. Inventory in Metro Denver also continues to decline dramatically for both homes and condos. This year, the Months of Inventory (MOI) started at 30-year lows (around 0.3 months). This trend has continued right into the spring. On the bright side for buyers, coronavirus vaccines should encourage on-the-fence sellers to take the leap. Hopefully, by as early as this summer, some will feel safe enough to invite people in for showings. This should add some inventory to the market.
On a broader scale, the housing shortage is harder to solve than many people may think. Preparing land for new construction and going through the necessary permit processes can be a multi-year affair. Homes cannot be built fast enough to meet current demand. Our current housing market is a result of basic supply and demand. There are not enough homes on the market, and construction is slow due to pandemic fears. These factors, mixed with a strong supply of buyers, are causing average prices to rise.
In Q1 2021, average home prices were up 19% for detached homes and up 10% for condos. This is well above the 6% average appreciation from 1971‒2018. However, it is also important to note that these dramatic price increases are partially due to an influx of luxury listing sales over the past year. Strong price appreciation is expected to continue across all price ranges for the first part of the year, but more moderate price growth is likely in the second half.
INFORMATION FOR BUYERS
FRUSTRATIONS CONTINUE FOR BUYERS AND THEIR AGENTS, BUT DEALS ARE STILL CLOSING
The scarcity of listings on the market has been the talk of many buyer’s agents this year, who are submitting offers in very competitive situations, often for over the asking price of homes. But despite tough times, there are still tactics that can make your offers look more attractive to sellers. One such tactic is an Appraisal Gap Guarantee. In the event the property does not appraise at or above the purchase price, the buyers promise to pay a certain amount over the appraisal price of the home if their offer is accepted. This can sometimes be an extra incentive for sellers to accept your offer over other offers that do not contain such a guarantee.
Most buyers are not negotiating as hard with sellers to fix minor inspection issues that may arise since sellers currently have the upper hand in negotiations. Some buyers are even waiving the inspection altogether to get deals done, but that is not generally recommended or prudent because you may get stuck with serious and costly issues to fix down the road. Whatever the case may be, an honest discussion with your agent can make all the difference to stay competitive in these situations.
INFORMATION FOR SELLERS
CAN I GET OFFERS OVER THE LIST PRICE? YOUR CASTLE MAY BE ABLE TO HELP.
For many home sellers in Metro Denver, the scarcity of inventory can be a blessing. If your home is in the entry-level ($0-$300k) to mid-range ($300-500k) price band, your home is likely in high demand. This makes negotiations much easier than they would normally be. Colorado is even in the top bracket of states across the nation, with over 50% of homes selling for an over-list price! But to what extent your home might sell over the list price will depend, in part, on the desirability of your neighborhood.
Due to this, Your Castle created our new “Sold at a Premium” price change maps. These are heatmaps showing which Denver neighborhoods had the most homes selling above the asking price for 1Q 2021. On this map, green means that under 25% of sales were at a premium. Red means 75% or more sold at a premium. As you would probably expect, very expensive areas like Cherry Hills had few homes that sold at a premium. Whereas homes in cheaper neighborhoods sold for huge premiums because of strong demand for entry-level homes. Keep in mind that you can never underprice a home. But you can, even in markets such as ours, overprice a property. Having a knowledgeable agent is crucial to your success on either side of the transaction.