Denver, CO’s Real Estate Did Not Surprise - It Delivered | Guest Post
Homes are safe places providing joy, safety and stability. As the world spirals, real estate remains a rare silver lining. Demographics and record-low interest rates drive demand while the uncertainty of jobs and schools weigh heavily on sellers. Even as builders rush to fill the market gap between buyers and sellers, their efforts will be determined by the stock market’s resilience.
Last week’s devastating U.S. Bureau of Economic Analysis report documented of the worst U.S. economic contraction of 32.9 percent from April to June, wiping out five years of positive growth. Negative economic indicators like high jobless claims and closing businesses are driven by the never-ending spread of COVID-19 cases.
Here’s what I see going on in the market.
Let’s start with the sellers. They’re not budging. Inventory continues to strain the market with 6,449 active listings at the end of July 2020, 31.1 percent less than July 2019. The uncertainty of the job market, the inability to find a replacement home, and the now the stress of homeschooling have sellers thinking twice about listing. Meanwhile, Denver saw new home pending sales up 17.9 percent in June 2020 - 22.9 percent more than June 2019 – and builder confidence rallied in July to meet the suburban demand trend with smaller homes void of shared spaces.
Alternatively, buyers clamored for homes that are priced right and staged well, with 31 percent of detached homes selling for over asking and average days on market dropping 7.7 percent year over year and median dropping 36.4 percent. First-time homebuyers, downsizers and investors drove the demand for $300,000 and $500,000 valued homes to close at 100.6 percent of the list price. Buyer demand increased for mansions as homes valued $1,000,000+ experienced 55 percent more homes sold in July 2020 than July 2019, pushing the average single-family detached average above $601,863 – a 10 percent increase over last year.
Speaking of McMansions, the two highest-priced home sales in July were a $7,000,000 home in Boulder and a $5,985,000 home in Cherry Hills Village.
For each week in July, Denver ranked in the top six housing markets in the nation by Realtor.com’s weekly measure of market recovery - and we felt it! 6,664 homes closed in July which came from June’s record number of pending home sales, breaking the previous record of 6,230 homes closed in June 2017. Low-interest rates and pent-up COVID-19 demand pushed record-breaking, short-term stats. Demographic changes will benefit the long-term outlook by further increasing housing market demand.
Low-interest rates not only fueled demand but gave buyers a Christmas present in July! As I noted, the average closed price for a single-family detached home rose to $601,863, up from $547,537 in July 2019. If I calculate a payment at today’s 2.99 percent interest rate with 20 percent down for the median home price compared to a year ago, home buyers are now saving $43 per month.
Now is the time to stop paying your landlord’s mortgage and move into a position of wealth and stability.
What keeps me up at night? The stock market. As CNN’s Fear & Greed Index moves further into Greed and Citigroup’s Panic/Euphoria Index points towards extreme Euphoria, both point to lower stock prices within a year.
All signs point to an excruciatingly long economic recovery as COVID-19’s death toll increased to 155,000, positive cases doubled with no hint of slowing down, high jobless numbers and unemployment claims, and Yelp’s business tracker shows another 15,742 businesses closed permanently in July.
Real estate, however, continues to show strength. Looking to September’s market trends report covering August’s data, July has a potential record-breaking 7,122 pending home sales - 27.47% higher than September 2019.
Now, that lets me sleep better at night!
Your Partner in Building Wealth through Real Estate,
The Rueth Team of Fairway Independent Mortgage Corporation
The views, opinions and positions expressed within this guest post are those of the author alone and do not necessarily represent those of the Denver Metro Association of REALTORS®. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.
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