An Insider’s Look at Denver’s Real Estate Market
Denver’s real estate market is off to a healthy, strong, and early start to the selling season.
Available “for sale” homes have been running at low levels while demand has been consistently strong. This will remain a reality as interest rates are projected to remain at historically low levels. Active listings reached their lowest historical count in December of 2017, with 3,854 homes available for sale in Denver Metro. By end the of 2019 “for sale” homes climbed to 5,025, which sounds decent until compared to Denver’s 30-year annual average of 12,626 active listings. For additional perspective, the record high came in July of 2006 when we recorded 31,989 listings, representing a 6.6-month supply of available homes, compared to today’s 1.2 months of inventory. Buyer demand made 2019 the second-highest year for closings in Denver’s history with 58,404, eclipsed in 2017 with just over 59,000 closed deals.
Buyers need to be aware, focused, and prepared to move forward, while sellers can enjoy improved values by pricing their property correctly, and not being too proud of what they own. From 2012 through 2017, Denver experienced annual value appreciation of +/- 10%/year with 2019 relaxing in the 4.5%-6% range. 2020 is projected to be in that same range with increased values taking place between now and June, much like the last several years.
The rate of inflation in the U.S. has been +/- 2% since the millennium, approaching 3% during the recession. At an annual 5% annual value increase, homeowners realize appreciation (more than double the rate of inflation), by just making their house payment. By borrowing money to purchase your new home (and most everyone does), the financial story is considerably better. Say you make a 20% downpayment ($100,000) on a $500,000 home and it increases in value at 5%/year (approximately $25,000 /year), for four years. That home is now worth about $600,000 ($25,000×4), but your cash-on-cash return on your downpayment has doubled ($100,000) in four years because you leveraged your real estate investment … tough to beat!
Realtor.com’s “Markets to Watch” for 2020 finds that Colorado had two of the “Top Ten” leading markets in the country — Colorado Springs and Ft. Collins. Inman.com looked at the best ski towns for buying a second home, and Breckenridge and Dillon rank third and fourth in the country.
We see positive conditions, with a 50-year low in unemployment, increased wage growth, and extremely appealing mortgage rates. However, supply of available homes is weak compared to ongoing buyer demand. In part, this is due to under building, because of constraints in labor and readily available land. Also, bureaucratic (governmental) offices take forever to receive approvals in zoning and building departments while these inherent costs are passed on to the consumers (over 25% of the home’s sale price).
For potential sellers wondering when to place their home on the market, place less emphasis on the timing of when your home hits the market and more focus on appropriate pricing, without leaving money on the table. It’s common to think of real estate as a seasonal industry, but factors like the economy, property condition and price, have greater impact on selling success than any month. Currently, if a home is on the market for a month, it probably has more to do with how it shows or the price. Of course, there are more buyers in April than in December, but the amount of competing homes is also much higher. Remember that when the weather is warm, the grass is greener, and flowers are in bloom; everybody else’s garden is looking pretty darn good also. Increased days on the market usually translates into price reductions, and that has little to do with when a home is for sale. After years of tracking price-reduced listings, to homes that sold close to list price, it is clear that pricing your home correctly from the start positions you to get the best possible price, in the most reasonable period of time.
Visit an open house, go online, and put your toes in the water … it’s nice and warm!
LIV Sotheby’s International Realty is Colorado’s leading luxury real estate firm with an emphasis on lifestyle. For all of your real estate needs, contact LIV Sotheby’s International Realty by calling 303.893.3200 or by visiting livsothebysrealty.com.