March's Numbers are in: the Good and the Bad | Guest Post
March broke many records as our housing market continues to color outside the lines. Let’s start with the average close price for detached single-family homes. This segment was one of those new records at $674,990, up 6.72 percent from last month. Yes, prices rose 6.72 percent in just one month and up 19.3 percent from last year. We would be happy with an increase of 6.72 percent over an entire year. The attached single-family segment hit its peak averaging $416,775, up 8.17 percent from last year. While 8.17 percent is a healthy number, it demonstrates the detached single-family segment is the fuel driving this housing market.
From time to time, I will use the term “the speed of the market.” This is what it means in numbers. Days in MLS for the detached single-family market set a record low for an average of 15 days and tied the record for a median of four. Remember, both numbers are all-time record lows. The other metric I follow is the months of inventory (MOI), also known as absorption rate. This looks at the ratio between inventory and the rate of sales. This March MOI dropped to 0.39 months. Given our current inventory and current rate of sales, it would take 0.39 months or less than 12 days, to deplete that inventory. To put some added perspective, in March of 2008, we had 6.59 months of inventory.
Available inventory continues to drop, posting a new record each of the last few months. March established yet another new record low of 1,921 available listings for sale. That is 5.09 percent below last month and 66.74 percent below last March. It’s this time of year when we kick-off our spring selling season. We anticipate seeing a bump in our available inventory with a lot of sellers entering the market. The normal seasonal increase in new listings from February to March is around 33 percent. This year’s number was 26.7 percent. While we posted a number slightly below our seasonal average, it did show sellers are entering the market. So why is inventory continuing to drop? In my opinion, we are experiencing “hyper demand.” Pending home sales were 5,799 in March, up 24.8 percent from last month and 28.1 percent from March of last year. The bottom line: we had fewer new listings entering the market than we had placed under contract.
So, what is driving this hyper demand? First, the Denver Metro area suffers from an imbalance between the number of people and the number of housing units. Second, mortgage interest rates in 2020 were at their fundamental floor of 2.5 percent. Even though we’ve seen an uptick in rates in 2021, we still have historically low rates. Lastly, COVID fundamentally changed our relationship with our home. While a handful of transactions were completed during last years’ lockdowns, we still missed about 4,500 home sales. When the lockdowns ended, it opened the flood gates, and nine months later buyer demand has yet to wane.
A Final Thought
As an observation, year-to-date we have closed 12,050 properties. That’s a strong number and on par with last year’s number and above 2019, 2018 and 2017. The unfortunate aspect is that new listings entering the market are down 13.16 percent year-to-date. That represents 2,200 fewer potential properties for sale that would have easily sold.
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