Here’s something true about today’s market. Properties are selling fast.
Compared to one year ago, the number of days it takes for a property to sell is significantly lower.
The industry term is “Days on Market” or DOM.
DOM is way down.
Here is the comparison of May 2020 versus May 2019:
- Metro Denver down 22%
- Larimer County down 19%
- Weld County down 16%
Initially, this may seem counter-intuitive. How could homes be selling faster in today’s environment?
Here’s the deal. The buyers and sellers who are active in today’s market are serious.
There really aren’t ‘tire-kicker’ buyers out looking at properties just for the fun of it.
There really aren’t sellers testing the market to ‘see what they can get.’
For the most part, buyers and sellers are on a specific mission and this mindset is showing up in the numbers.
For sellers especially, this is no time to test the market and be overly aggressive on price.
Properties that are priced right and in good condition are selling and often selling fast.
Housing affordability is a hot topic especially after the strong price appreciation that has occurred in our market over the last 7 years.
Here’s some interesting research on affordability…
Each quarter the National Association of Home Builders measures affordability in hundreds of markets across the Country.
Their method is to count the number of homes in a market that could be purchased with that particular market’s median income.
For example, San Francisco is the least-affordable market where only 8.4% of the homes could be purchased with their median income.
The most-affordable is Monroe, Michigan where 95.3% of the homes could be purchased with their median income.
Guess where all of the 10 least-affordable markets are. California!
Guess where almost all of the 10 most-affordable markets are. The rust belt (cities in Michigan, Ohio, upstate New York, etc.)
The U.S. average is 63.6%.
Metro Denver comes in at 55.3% and Northern Colorado at 54.5%.
So, roughly half of the homes in our market could be purchased with our local median income.
Here are the vital signs for the Northern Colorado market.
First, Larimer County:
- Average prices are up 2.4%
- Number of transactions is down 2.5%
- Inventory is up 11.9%
- Days on market is up 4.1%
Now, Weld County:
- Average prices are up 4.3%
- Number of transactions is up 3.6%
- Inventory is up 12.9%
- Days on market is flat (same as last year)
What this means is prices are still going up, just not as fast as they were a couple of years ago. More inventory is coming on the market which is great news for buyers.
Metrostudy, who in our opinion is the leader in new home research, recently did a study on the average price of a new home in each of the Front Range Counties.
Here are some interesting takeaways…
If you want to find the least expensive new home on the Front Range, the places to look are Weld County and El Paso County.
· Weld County Average New Home Price = $411,269
· El Paso County Average New Home Price = $427,361
The most expensive place for a new home is in Boulder County (no surprise) at $698,208.
Jefferson County has the largest difference between the average price of a new home and the average price of a resale home: $664,600 vs. $510,003.
Here’s the County by County breakdown of the average price of a new single-family home:
· Boulder = $698,208
· Jefferson = $664,600
· Douglas = $624,315
· Broomfield = $612,779
· Denver = $581,480
· Arapahoe = $545,943
· Larimer = $507,105
· Adams = $480,464
· El Paso = $427,361
· Weld = $411,269
There is an abundance of great news when it comes to employment in Colorado.
The unemployment rate is incredibly low at 2.7% which is almost a full percentage point lower than the U.S. average.
According to the Bureau of Labor Statistics, Metro Denver added 28,300 jobs over the last year which ranks 15th out of all metropolitan areas nation-wide, many of which have much larger populations than Denver.
While this is positive news, what is even more remarkable is what is happening in the other, smaller cities along the Front Range.
Anytime job growth exceeds 2.0% per year, it is a sign of a very healthy economy.
Here is what the other Cities have seen in terms of job growth over the last 12 months.
• Fort Collins 2.6%
• Greeley 2.5
• Colorado Springs 1.9%
This is a Tale of Two Counties.
When it comes to new home activity, there is a big difference between Larimer and Weld Counties.
Larimer County’s new home starts are down 10% and new home closings are down 15% compared to last year.
Weld County’s new home starts are up 18% and new home closings are up 8% compared to last year.
This is all according to the new home research experts and Metrostudy.
So why the difference? It comes down to price and availability.
There is more land available for new home development in Weld County.
Plus, the land tends to be less-expensive than Larimer which means that builders can deliver a lower-priced product and reach a larger pool of buyers.
The average price of a new home in Larimer County is $507,105 while the average new home price in Weld is $411,269.
Home Builder’s confidence in Baby Boomer buyers is at an all time high.
The National Association of Home Builders (NAHB) surveys their members each quarter to discover what they expect of future sales.
The builders base a large part of their answer on how many people are visiting their sales centers and model homes versus the same time last year.
The results in their most recent survey show that builders have never been more confident about buyers who are 55 and older.
The confidence index for this age group is actually double of what it was in 2012. The NAHB sites low interest rates and strong job growth as the reasons for the high confidence.
The following analysis of the Metro Denver & Northern Colorado real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere real estate agent.
Colorado’s economy picked up, adding 64,900 new non-agricultural jobs over the past 12 months — a growth rate of 2.4%. Over the past three months, the state added an impressive 28,300 new jobs.
In August, the state unemployment rate was 2.8%, down from 3.4% a year ago. Unemployment rates in all the counties contained in this report were lower than a year ago. It is fair to say that all markets are now at full employment.
- In the third quarter of 2019, 17,562 homes sold. This is an increase of 5.1% compared to the third quarter of 2018 but 1.6% lower than the second quarter (which can be attributed to seasonality). Pending sales — a sign of future closings —rose 9.7%, suggesting that closings in the final quarter of 2019 are likely to show further improvement.
- Seven counties contained in this report saw sales growth, while four saw sales activity drop. I am not concerned about this because all the markets that experienced slowing are relatively small and, therefore, subject to significant swings.
- I was pleased to see an ongoing increase in the number of homes for sale (+16.9%), which means home buyers have more choice and feel less urgency.
- Inventory levels are moving higher, and demand for housing appears to be quite strong. As I predicted last quarter, home sales rose in the third quarter compared to a year ago.
- Home prices continue to trend higher, with the average home price in the region rising 3.8% year-over-year to $477,776.
- Interest rates are at very competitive levels and are likely to remain below 4% for the balance of the year. As a result, prices will continue to rise but at a more modest pace.
- Appreciation was again strongest in Park County, where prices rose 7.8%. We also saw strong growth in Weld County, which rose 7.4%. Home prices dropped in Clear Creek County, but, as mentioned earlier, this is a small market so I don’t believe this is indicative of an ongoing trend.
- Affordability remains an issue in many Colorado markets and this will act as a modest headwind to ongoing price growth.
DAYS ON MARKET
- The average number of days it took to sell a home in the markets contained in this report rose seven days compared to the third quarter of 2018.
- The amount of time it took to sell a home rose in all counties compared to the third quarter of 2018.
- It took an average of 30 days to sell a home in the region — an increase of 1 day compared to the second quarter of this year.
- The Colorado housing market is still performing well, and the modest increase in the length of time it took to sell a home is a function of greater choice in homes for sale and buyers taking a little longer to choose a home.
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
For the third quarter of 2019, I continue the trend I started last summer and have moved the needle a little more in favor of buyers. I continue to closely monitor listing activity to see if we get any major bumps above the traditional increase because that may further slow home price growth. However, the trend for 2019 will continue to be a move toward a more balanced market.
ABOUT MATTHEW GARDNER
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
Some fascinating research from the Denver Metro Association of Realtors…
37% of properties that sold last month along the Front Range had a price reduction at some point during the listing period.
Property owners who have to reduce their price take an average of 58 days to receive an offer.
Those who don’t have to reduce their price only take 13 days.
This stat obviously speaks to the importance of pricing your property right on day one.
In a robust, healthy, market with lower inventory, we will frequently see homes selling for their asking price or even higher.
Here are the number of sales that occur for list price or higher in each of our major markets:
• Fort Collins = 60%
• Loveland = 60%
• Greeley = 71%
• Windsor = 56%
There are a couple of things we notice about these numbers. First, well over half of all sales are for at least list price. This means that a buyer needs to be prepared to make a full price offer (or higher) in most cases. This also means that if a seller is priced right and marketed effectively, they should achieve their asking price.
We also notice that these percentages are lower than one year ago. In 2018 these numbers were 5% to 10% higher in each market. This is good news for buyers of course because the bidding wars are not as intense as last year.