Market Updates »
If you step outside, you may think with the heat that we’ve been experiencing in Denver, Colorado, that it’s already August. But it’s not only the temperatures in Colorado that are hot, hot, hot! The Denver Metro real estate market is just as hot; however, we have seen some minor changes in the market and signs that it might be starting to cool off.
Since about February, we’ve seen what some simply call “crazy market conditions” all across Colorado. What we mean by this is that homes are not only selling the first weekend they are on the market, but for well over list price. In fact, the highest we’ve heard at TK Homes is $240,000 above list. This was on a home with a list price of $600,000, which is a total of 40% over list. Before you tell me these offers don’t mean anything if they don’t close at these unbelievable offer prices, that’s where things get even more crazy.
Most, if not all of these accepted offers are backed by full appraisal gaps (meaning the appraised value doesn’t matter, they will pay the offered price guaranteed), and in addition, these offers have limited or no inspections. All of this means these offers are actually closing at their crazy offer prices. So, what is different now that we weren’t seeing just a few weeks back?
First, there is more inventory. In fact, before we were seeing roughly 900 +/- homes hit the market each week. Now, we’re seeing upwards of 2000 homes hit the market each week. This is certainly going to help reduce the crazy offer scenarios; however, these numbers are not enough to stop these offers altogether. When writing this article we saw 2100 +/- homes go under contract, which means there are still more buyers than sellers. However, if the trend of new inventory continues, we should start to see the supply balance out, giving buyers more options. This means there will be less buyers per home on the market. This will result in less offers and hopefully buyers not having to go as high over list to get an offer accepted.
The other big change in today’s market versus even a couple weeks ago is the number of these offers going so much over list. Before, offers that went $50,000 or more over list were normal. Now, we’re seeing offers accepted that are only $15,000 to $25,000 over list price more often. This doesn’t mean we’re not seeing the crazy $50,000 plus offers; however, in most of these cases, it’s simply buyers going this high because they still feel like they have to, and their agents not asking the right questions before structuring an offer (this is why everyone at TK Homes thoroughly interviews a listing agent prior to structuring our buyer’s offer, to ensure we’re not paying more than we have too).
The reason we’re seeing offers that are closer to list price is pretty simple. List prices are catching up to the previous crazy over list offers we saw in the past few months. Enough of these homes have sold at these $50,000 plus sales prices that there are now enough comps to justify listing homes for sale today higher. Also, buyers simply are not wanting to pay $100,000 over what the house would have sold for a short 6 months prior, causing fewer offers as well as offers closer to list price.
As we continue to watch the market unfold, it is TK Homes’ opinion that we’re going to start seeing the market balance back out to where it was pre-2019. Please don’t misunderstand us, values are not going back down to pre-2019 values; those are going to stay strong and most likely continue to steadily rise. However, we should start to see more inventory giving all buyers more opportunity to make strong offers closer to list price, just like we saw in 2019. The big question right now is when will we get there and where will interest rates be when we do. Only time can tell us for sure!
Use the comments below to tell us your opinion on where the market is headed (and, if you’re thinking we are in a bubble, please explain why). Additionally, if you’re curious about buying, selling or investing in real estate across the Denver Metro area, contact us, and let’s get you started down the right path to reach your goals!
Article written by Team Leader & REALTOR®, Trevor Kohlhepp