It’s likely you’ve heard your favorite real estate agent use the term “compressed seller’s market” over the last month-or-so. That’s what they mean.
Picture two rooms: a show room, and a waiting room. In the show room exists all of the houses for sale in the Denver Metro Area. There are 6,400 houses in this room. That might seem like a lot, but it isn’t. The other room is a waiting room.
In March and April, that show room was closed. No one could get in. Different story in that waiting room, though. Plenty of people got into the waiting room. People were (hypothetically) packed into that waiting room. Pick a simile: “they were packed in like sardines”, or “it was like the last Costco after the apocalypse…” Whatever. It was hot, sweaty, frustrated, tense…full of people slowly realizing that on the other side of that door, the amount of houses to buy wasn’t growing proportionately with the amount of people entering the “I’m going to buy a house” waiting room.
Eventually, the door to the show room with all the houses opened. All the people in the waiting room rushed through the door in a panic to find the house they wanted. When they found it, two, or three, or four, or twenty people had beaten them there and submitted offers. Maybe the offers had escalation clauses that ratcheted the purchase price up $30-$40K. Maybe the other offers promised not to ask for anything to be fixed. Maybe the buyers said “Here! Have my earnest money!”
My favorite statistic to throw out when discussing residential real estate is “months of inventory.” Right now, that 6,400 number referenced above represents less than one month’s worth of inventory. If houses stopped coming on the market this second, it would take about three weeks for those 6,400 houses to get purchased. Stop me if you’ve heard this: a buyers’ market requires 6 months of inventory. Six houses for each buyer to choose from. Right now, each buyer in our market has less than one house to choose from, on average.
A few other notable statistics for you:
The median home price in the Metro Area is $447,500. Up 4.5% from last year.
The average home price in the Metro Area is $510,000. Up 3% from last year.
6,400 homes on the market represents a decline of 32% year over year.
1. Prices are going to continue to rise.
2. When we see inventory rise, we will see interest rates rise. Perhaps we’ll see purchase prices level out come fall or winter should inventory rise as it normally does, but higher interest rates limit your purchasing power, so those two variables will cancel each other out.
This is a very glossy gloss-over of what’s happening in our real estate market during a time that continues to be confounding, unpredictable and yes…still unprecedented. If you’d like to do a deeper dive into what this means for you, I’m always here.
Happy July, by the way. Can’t believe how quickly the calendar keeps flipping in 2020. Hope you’ve all enjoyed summer so far, had a fantastic 4th of July, and are of course, happy, healthy, and making the most out of all our world continues to offer us.
Until next time!