August 2023 Colorado Market Update
"In order to catch a ball that is rolling downhill, you need to run faster than the ball."
~ Warren Buffet
The concept of accelerated motion was first explored by Galileo, then Aristotle, later Einstein, and this quote being often attributed to Warren Buffet in his application in investing. My brokerage community and I revisted this concept during a recent market review session hosted by Megan Aller of First American Title as we discussed the strategy for price reductions in the market.
One of the great benefits I enjoy with my brokerage is access to incredible knowledge through expert resources.
While I get to work on the ground floor level with my clients, having a statistical analysis of what is happening in the marketplace always at my fingertips allows me to keep a continuous birds eye view as well.
Recently during my weekly sales meeting, we discussed overall market trends in Colorado and specifically the Denver Metro areas along the Front Range, and how these trends impact Sellers' decisions in pricing and positioning.
Sellers are asking, "Should I get my property on the market now or wait to list until next Spring?"
And, "Should I just reduce my price by a little at a time or wait and do a significant reduction later?"
Buyers are asking, "Should I shop now, or wait until interest rates adjust?"
There is a wide variety of what is happening and there are trends in specific locations, however there are some general trends as well across the Denver Metro area. As I collaborate within the real estate community and as a personal numbers junkie, I am constantly researching leading market indicators to understand those trends which enables me to best advise my clients.
Leading market indicators:
# of Closings
Active Listings (Inventory)
MSI = Monthly Supply of Inventory
Odds of Selling
# of Showings
Average # of Showings prior to receiving an offer
Pricing Trends (Reductions/Increases)
Days on Market
List/Sale Price Ratios
Having an understanding of these metrics allows me to better answer the daily question I get asked:
"How is the market?"
Here is a quick snapshot of these metrics and some of my market takeaways to help digest the numbers and enable you to make informed decisions or simply satisfy some of your real estate curiosity.
As we head into the 3rd quarter of 2023, prices have stabilized overall and # of closings decreased slightly from 1,159 in June to 1,108 in July.
While total # of closings are still lower than 2022 which was 1,470 and 1,468 respectively, 2022 is still looking to be a strong selling year historically.
Active listings (detached single family) increased from June to July by about 17.2% to a total of 4,289 active listings. However, as compared to last year, Denver Metro is at a negative of -14.3% YOY less inventory in the market as compared to times in the past and is expected to remain this way through the end of the year.
This stat can be a strong Seller's market indicator in that Sellers will have less competition, however with longer days on market as compared to last year, Seller's are needing to reset their expectations especially in light of the 2022 Seller experience.
Both Buyers and Sellers are currently motivated more now by NEEDS vs WANTS. Whereas last year, low interest rates made the financial mobility of moving much more palatable and advantageous for both parties, higher interest rates this year limit the "want" buyer motivation and result in more of the "need" motivation for both Buyers and Sellers.
MSI = Monthly Supply of Inventory. This metric speaks specifically to how much inventory there is compared with how quickly Buyers are buying.
In a balanced market, 6 months of supply is considered normal, and in years between 2008-2011 the numbers varied between 6 - 10 months supply of inventory which meant for every buyer there were 6-8 homes to choose from.
Currently Denver Metro is averaging 1.4 MSI which would suggests inventory levels are still drastically low and we are still in a Seller's Market. This metric varies by location and price point.
Hottest Markets by location (MSI):
Green Mountain = 0.63
Arvada/ Stanley Lake = 0.97
Highlands Ranch = 0.89
Greenwood Village = 0.97
Parker 1.21
Cooler Markets:
Sloans Lake, Denver 2.0
Castle Rock 2.26
East Aurora 3.5+ (lots of builder inventory)
MSI by Price Range:
Price Range | MSI | |
$400-599K | 1.5 | Priced to sell |
$600 - 799K | 1.9 | Warm |
$800 - $900K | 2.9 | Cooling but still strong |
$1.0M - $1.5M | 2.3 | Warm |
$1.5M - 2.0M | 9.8 | Challenged - Most competitive price range |
$2.0 M - $3.0M | 2.7 | Cooled but still moving |
Seller Takeaway:
With more buyers in the market than homes to buy, there is still significant competition for homes that are priced correctly and marketed well.
Odds of Selling
July 2023 saw an average of 55.2% odds of selling as compared to the record high of 87% March of 2021 at the peak of the market.
This number is only - 4.7% than as compared to last year, however September can be the lowest odds of selling b/c of increased inventory so we can expect this to come down a bit.
*Attention Sellers!**
This means it is INCREDIBLY IMPORTANT to price your home correctly if you are about to list and professionally staging is more important now than ever to get your marketing right from the beginning to increase your competitive advantage and odds of selling.
But conversely, this can be a GREAT time for Move Up buyers ready to purchase who don’t want to compete with other buyers in a spring market (March- June) when we would traditionally see more competition.
Currently, we are seeing an overall 30% reduction of active inventory as compared to historical numbers.
Flight to Quality
And interesting indirect result of this may be the massive reduction on a national level of active licenses. 60,000 real estate agents have been said to have let their licenses expire across the country. However, Colorado is still a healthy market and while REColorado has stated that there has only been a 3% reduction, there has been a huge increase in agents converting to Non-Realtor status which allows for part time agents who only want to sell one or two properties per year.
* source Megan Aller, First National Title
Total # of Showings increased June- July with an average of 6.7 showings per month.
We like to see people actively looking at properties. Holiday weekend showing counts slow down significantly, and during the preparation for kids going back to school traditionally slow things down too. However, the buyers that are looking are typically serious and are "needing" to make a move so while the increased activity is a good sign for overall health, it also means more showings are needed on average to receive a viable offer.
Currently, across all price points, Sellers are seeing an average of 14 showings per before receiving an offer.
Pricing Trends:
Average sales price is down 1.7% but YOY has increased 0.3% so the market is basically flat in its appreciation.
Across Denver Metro, we are seeing Price Reductions in 31% of properties and in the $1.0-1.5M price range, Sellers are reducing an average of 6%.
Days on Market (DOM):
This DOM average shifted significantly from June to July. In June, average DOM soared to 39 and 48 in areas such as Castle Rock. However it softened in July to 22 DOM which is odd in that we usually see this number climbing each month as we near the end of the year.
And the most competitive price point in July was the $1.0-1.5M range where we saw 33.3% of homes pending in 7 days or less.
List/Sale Price:
Original Price/Close Price Ratio was still very high and strong at 98.7% on average, however this of course varies greatly by area and price point.
Over asking is not normal at this time although we are seeing Buyers offer over asking price if they are requesting significant seller concessions to buy down the interest rate on their loan which nets the Seller an adjusted number.
Buyer requests for large seller concessions have become common practice for many buyers to combat rising interest rates. On a $1M home, buyers are often asking for $20,000+ in seller concessions, so it is important to be comfortable in your understanding of the take home value.
When a property is priced well in a desirable area, Sellers do sometimes see multiple offers and close above asking price.
Hottest over asking markets:
West Aurora
Northglenn
Thornton
Foothills - Evergreen, Green Mountain
Boulder
And so as we head into September soon, we can expect a few things.
We can expect inventory to continue to increase, days on market to increase, showings to increase and more price reductions to occur as Sellers aim to sell prior to the winter months.
But overall, with inventory being tremendously low and with many qualified buyers simply waiting for the right home, it is still better to list now than to wait due simply due to the reduced inventory.
And although currently inventory is down 24% across front range, my Brokerage, LIV Sotheby's, is only down 8% YOY.
And... while total dollar volume of sales is down 20% across the region, LIV Sotheby's is only down 3% in volume YOY.
What does this mean? It comes back to the flight to quality and the realization of what a difference a professional can make in helping both Buyers and Sellers achieve their real estate goals.
And so, what to do?
Based on our understanding of accelerated motion, it is important to get ahead of the momentum and react sooner than later.
Knowing that the fall is typically known as a downward market, indicates that the best strategy right now is to price right and not skimp on the initial marketing in the hopes of avoiding the downward roll altogether. However, if you do start rolling, do not wait to react. Respond swiftly and re-position with ideas such as new pricing strategies, new marketing angles, and working with a professional at your side to guide you is crucial.
The soft moves may not allow you to get in front of the rolling ball to catch it.
The horizon...
After inflation cools a bit more and interest rates drop again (they will eventually) , the prediction is that there will be a rush to market. So Sellers and Buyers want to be aware and ready to be positioned well.
If you would like a market evaluation of your current home, would like to discuss getting started in Buying a home in Colorado, or just grab a cup of coffee to talk about the market, please contact me at rachel@rgoodliving.com.
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