We have been waiting almost exactly 10 years for this moment. A market shift.
Since 2012, the Denver area and surrounding real estate markets have been running at
an incredible pace. The average sales price in the Denver MSA in February of 2012 was
$247,282. The average days on market was 85 days and the previous 12 month decline
of interest rates from 4.8% to 3.89% spurred renewed faith in real estate after a 3-year
hangover from the great recession (which officially only lasted 18 months).
Since then, the Denver 7-county area has experienced a population growth of 17.2% to
2,897,000 driven by many factors including sunshine, outdoor lifestyle and economic
diversity. This has resulted in Denver’s median household income being #7 in the nation,
increasing by 49% from 2012 to 2020 (most recent numbers).
Yet over the same period of time (2012-2022), the number of new listings to the market
YTD (through June 3, 2022) has only increased by 7.6%, while contracts and sold
properties YTD have increased by 19.8% and 32.5% respectively. Demand has not only
increased through a sustained low cost of capital and diversified economy, but through
the simple supply/demand ratio driven by population growth.
As of June 3, 2022, the average sales price for all residential real estate property types
has increased to $728,807 and detached single family homes to $803,544.
What does this mean for the Denver real estate market? As always, the most
important thing we do is look at the lead indicators, or those factors most
predictive of future change. Arguments can be made for which indicators are the “right
ones.” Here’s a sample list from which one could choose.
● Housing starts
● Population migration and future estimates
● Labor markets and household incomes
● Supply chain and market availability of key raw materials such as oil, fertilizer
● 10 year treasury rate
● 30 year interest rate
● Inflation rate
● Recession predictions and stock market anticipation
● Buyer behavior
● Real Estate pricing and purchase patterns
● Volume and activity change in local and national real estate markets
Reality is, we read all of it and a lot more for integration into understanding and
For example, as we have been saying for 5 months, the cost of gas and availability of
fertilizer and its key ingredients to American farmers and across the world, couple with
continued supply chain issues, is going to lead to rising prices and food shortages. True
famine will exist in parts of the world and the availability of things we’ve always taken for
granted (like Jif Peanut butter) will become scarce. Jif peanut butter doesn’t have a
direct impact on the Denver real estate market (that we know of), but the impact is
indicative of macro issues that likely have a ripple effect on population migration, travel,
labor markets and ultimately, real estate purchasing power and consumer confidence.
Rather than making this too complicated though, let’s look at some of the basics with
direct impact on Denver real estate.
Denver MSA (Metrolist) inventory hit 4,493 homes as of June 3, 2022. That’s the highest
inventory level since October of 2020.
While this could be interpreted as a slowdown in the market (which it is), it’s important to
remember that a balanced real estate market with an MSA the size of Denver requires
15,000 or more listings.
Showings and Interest Rates
Year to date has been extremely strong for showings though a pull back from the 2021
record breaking Spring. But showings have slowed markedly and correlate to the rise in
30-year fixed interest rates.
The year started with the 30-year fixed interest rate at approximately 3.2% and buyer
activity was very strong. By March 1, inflation concerns had set in with the general public
and FOMC monetary policy was more widely understood. Rates rose rapidly between
March 1 and April 15 and there appears to have been a surge of buyer activity over that
period of time, peaking the second week of April. This could be interpreted as some
panic purchasing as buyers were getting priced out of the market through both continued
appreciation of the competitive market and no longer qualifying for homes due to the rise
in interest rates.
By April 15, reality had set in and since, we’ve seen a sharp decline in buyer
activity. This change in buyer activity has an obvious impact on the market that both
buyers and sellers need to be aware of. Longer marketing times begin to surface, fewer
offers, more price reductions, lower offers and the nature of those offers changing.
List Price to Sale Price
The last 18 months have been wildly imbalanced with interest rates through the floor and
inventory historically low. This supply/demand ratio has driven out of control buyer
behavior and off the charts historic home value appreciation.
But as those two factors, interest rates and inventory shift, we see a ripple effect. In April
2022 we saw an incredible 78.6% of homes sell for MORE THAN THE ASKING PRICE
with only 11.9% selling below the asking price. Go back to February of 2012 and 15%
were selling for more than the asking price and 76.4% were selling for below. Heck,
February 2020 (YES JUST TWO YEARS AGO and before the pandemic) only 27.4% of
homes were selling for over asking price, with 54.2% selling below. Over the last 24
months, a Denver area real estate agent could be an idiot at pricing a home and look like
a hero. That’s over. We are seeing the leading edge of that change. It started 3 months
In a typical year over the last 10 years, we’d see about 18% of homes experience a price
reduction in April. This year we were at 6%. The pattern is following a typical and
seasonal upward trend already, but this time I believe we will see acceleration; a marked
rise in price reductions for a handful of reasons:
● Sellers may be aware of the market shifting, but unwilling to accept this impacts
their original list price.
● Agents are both bad at pricing, property preparation and setting expectations
with sellers. As such homes will be listed too high to accommodate the emotion
of a seller or to “get a listing”.
● Buyer activity is as low as we’ve seen this time of year, for 4 years.
● Interest rates continue to rise (at least for the moment)
● We are moving into the season of a negative price curve that has happened
every year for as far back as we have data. Simply, average sales prices decline
June through the end of the year.
Days On Market
All of this will result in longer marketing time of properties which will demand more
professionalism of communication and execution strategy, and more of a partnership
between agent and seller.
Mid-April of this year saw a historically low 6.87 average days market time for new
listings. In 6 weeks that number has doubled to 13.5 days. While still incredibly low
historically, I predict a marked rise in DOM over the coming months if interest rates
remain where they are, inflation remains high and concerns of recession (which is
Reminder, we saw the beginnings of value recovery and a 10-year run of appreciation in
Denver with DOM average 85 days in February of 2012.
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