Market activity is up, but activity differs by price point
We’ve seen a surge of activity in the Denver marketplace as the stay at home order has lifted. Interest rates are low, buying power is up, but the pandemic has shifted the market.
Here are a few quick hits on how Covid-19 changed our real estate market:
1. Summer is the new spring — The usual spring market (March, April and May) has shifted to a consolidated summer market (Jun and July).
2. New Spaces — outdoor spaces, home offices and home gyms are trending up.
3. On-point photos — photos and videos are more important now than ever before. Buyers are finding homes on new platforms including Youtube and Instagram.
Our brokerage, milehimodern, has showing requests booked directly from Instagram pictures. Buyers are scrolling through all social profiles on their smartphone (not only Zillow and realtor.com). Beautiful pictures are key to successful sales.
Covid-19 has wreaked havoc on all our lives and has deepened some Denver real estate trends developing over the last several years. Overall, Denver remains hot seller’s market. As the market stalled and sellers pulled back with the pandemic. During the heart of Covid-19, we started to approach a balanced market, but now on the outskirts of the virus, at least for now, the seller imbalance is deepening — demand now greatly outstrips supply particularly at price points below $1 million.
The $1 million price point, in fact, is where the story really sharpens for central Denver neighborhood homes as the real estate plot diverges at this price. Generally speaking, homes above $1 million sit on the market longer, receive fewer offers and have a more balanced supply-demand curve. Homes below $1 million, however are hot, hot, hot.
Central Denver Neighborhood Insight
The numbers below show statistics from January – May 2019 vs, January – May 2020. With sales shifting to Closings in June, July and August, I expect the below numbers to change as we head into Q3.
The below data covers my core neighborhoods of Cherry Creek, Washington Park and Bonnie Brae:
Source: Denver MLS data
You can see homes in both price buckets saw sales drop similarly year over year in January through May. In fact, median sold price of homes under $1 million in these three core Denver neighborhoods dropped significantly more (12 percent drop) than homes priced over $1 million (0.2 percent drop).
What the numbers don’t reveal is that, generally, homes under $1 million are receiving multiple offers and waived contingencies, while homes over $1 million have a smaller pool of buyers and take longer to sell.
[See all under-$1 million homes available for sale in Cherry Creek]
The most recent data on months of supply for these neighborhoods tells the clearer story. A market balanced between supply and demand has six months of inventory. Homes above $1 million have 4.1 months of supply while homes below $1 million have only 2.5 months of supply.
This means homes in both price buckets face clear sellers’ markets; however, homes below $1 million have much more demand.
This means homes in both price buckets face clear sellers’ markets; however, homes below $1 million have much more demand.
Buyer + seller expectations redefined
Overall, I’m seeing a bit of a disconnect between buyers and sellers. Buyers are expecting a discount, because Covid-19 froze the economy and sellers see not much seller competition and feel prices should hold steady. In some ways both need to temper their expectations.
Buyers, in general, should be prepared for stiff competition and expect to pay full or near-full list price, especially for homes under $1 million. Those looking at higher-priced homes actually have a bit more leverage and can make more aggressive offers on price and terms.
For sellers of homes in the under-$1 million bucket, you stand in a great position. Price your home realistically and you can expect multiple offers (caveat: if you price too high, buyers are shying away to a degree after Covid-19 I haven’t seen before; a miss in pricing too high could require a steep price reduction).
For sellers of homes in the higher price points, expect a cooler buyer climate, but if you need or want to sell in 2020, now’s the time; as we get closer to the 2020 presidential election, the market tends to slow.
Sellers should emphasize outdoor spaces to reflect increased buyer demand for them post-Covid-19. Source: milehimodern
Buyer desires have changed with COVID-19, too. Buyers are looking for outdoor space, home offices and work out space. Sellers should highlight spaces that can serve as an office or a gym and spotlight outdoor areas and gardens.