Virtual tours and videos have replaced open houses and in-person showings
With spring upon us, typically the hottest season of the year for Denver real estate, we’re facing a very different Denver real estate environment.
COVID-19 and the widespread self-quarantine in Denver and beyond has undeniably greatly impacted the local real estate market. With that, I want to provide an update on the market just over about five weeks into coronavirus’s influence on buying and selling homes in Denver.
Overall, we continue to see fewer and fewer showings these days, and, though the market hasn’t stopped completely, it looks to be headed in that direction. But, as I shared earlier this week, it is still possible to complete a real estate transaction in Denver.
The state considers real estate an essential business, but transactions must occur differently, namely: in-person showings, staging and listing photography can no longer occur, but buyers can physically inspect a property after executing a purchase agreement. In addition, closings can now occur digitally.
Many buyers and sellers are pushing pause on their plans for the moment and plan to resume when it is safe to do so. That said, there have been some offers written “site-unseen” due to low inventory in specific neighborhoods.
With that, I’ve been monitoring the market, with the help of data from Megan Aller, a title rep First American Title we work closely with at milehimodern.
We analyzed COVID-19’s effect on the market by comparing activity during the last normal week, which the data shows was March 4 – March 10, and uncovered five main takeaways.
In appreciation for all of our local health care providers and first responders working in high-risk environments, I’ve started this GoFundMe page. Consider a donation; even $10 to $20 will provide a warm meal to frontline workers.
The market is on track to become more balanced
As anyone who’s watched the market over the past few years knows, inventory has been tight. This lack of available homes for sale, especially at lower price ranges, has pushed home prices higher and higher, and created a lot of competition among buyers.
The below graph shows how COVID-19 is pushing inventory down, and with it the imbalance between supply and demand. Of course, we don’t know what will happen when our lives begin to get back to normal, but, for the foreseeable future, the strong Denver real estate seller’s market will increasingly wane.
This means that buyers will be in a better position to buy than in years past. But, as I advise all my clients, hold off on pursuing a purchase now unless you absolutely need to buy. A balanced market is defined as inventory that would last for six months at the current demand.
Based on MLS data for Adams, Arapahoe, Broomfield, Denver, Douglas, Elbert and Jefferson counties. Source: First American Title.
Lookeloos are disappearing
In every market, a certain percentage of those viewing homes have no real pressing desire or need to buy. They use the opportunity to see what’s on the market, view inside homes in their neighborhood, to just pass the time, and more.
However, the quarantine is keeping many of these viewers on the sidelines. That, and the state’s declaration that prevents in-person showings, has lowered the average number of showings of Denver homes before a contract from a 2020 peak of 19.1 showings for the week of March 4 – March 10 to an average of 9.9 showings per signed contract in the week from March 25 – March 31.
Sellers are pulling their homes off the market
Well, this explains why inventory is dropping and the market is approaching a more balanced state. The number of withdrawn properties increased in Denver Metro by nearly 2X from March 4 – 10 (peak week) to March 25 – 31.
Housing is in better shape than 2008 slowdown
While we are undeniably facing a housing slowdown in Denver for the next few months, data shows that we shouldn’t expect a devastating housing crisis like the one we experienced in 2008.
Compared the the recession in 2008 where we had more inventory headed into it, we have now lower inventory but more appreciation. From 2010 to 2020, we see annual appreciation hovering from 5.5 to 15.5 percent, depending on price point. Contrary to this, from 2001 to 2005, the appreciation stood relatively flat.
Source: First American Title.
With this steady appreciation, more sellers have equity in their homes as opposed to owing more on their home that in they may be worth. This will prevent foreclosures and short sales, and will help ensure that the sellers that may have to sell will walk away with some cash.
The Greater Metro Denver Market shows signs of insulation still by lack of inventory at most price points
Price points differ
We saw this trend before COVID-19 started changing everything. In general, the market at higher price brackets represent more of a buyer’s market than the seller’s market that exists at lower price points.
For example, at homes priced over $3 million, the market actually favors buyers — supply outstrips demand. For Denver homes priced between $1 million and $3 million, a seller’s market reigns, but not to the degree it does at price points below $1 million.
Most importantly, stay safe. Email or call me with any questions or just to say hi :).
As always, should you have any questions or concerns regarding the market, please contact me: firstname.lastname@example.org.