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With the Denver metro area’s first snowfall officially in the books for the fall/winter 2024 season, it’s time to talk about Denver’s real estate market and how it’s holding up to the fall selling conditions. Historically, Denver’s real estate market sees a noticeable slowdown in the final quarter of the year. 2024 is not proving to be the exception to this trend.

As we gear up for the fast-approaching holiday season, it appears buyers are more concerned about their Thanksgiving plans and New Year’s celebrations than buying a home before the end of the year.  Even with the Fed’s first higher than expected Federal Rate cut of 2024, interest rates have remained high.  Most borrowers today are seeing rates in the high 6s to even low 7s. With these rates, despite the Fed's recent rate cut, borrowers aren’t seeing much, if any, relief from the high interest rates that have persisted since mid-2022.This is causing many buyers to continue to stay on the sidelines and not make a home purchase this fall. This trend can be seen even more so with homes priced below the $1,000,000 price point.

As mentioned in previous Denver Market Update articles, we are still seeing two very distinct markets across Denver: homes priced below $1,000,000 and those priced above. Homes that are priced below $1,000,000 are seeing much fewer showings, offers, and closings. In fact, the movement we’re seeing most in this price range is price reductions. Homes that are valued above $1,000,000 are seeing higher levels of showings, offers, and ultimately, closings.

We saw this specific trend very clearly after the initial announcement of the Fed’s rate cut in September. Several homes that were priced above $1,000,000 that had been sitting prior to the announcement ended up going under contract very quickly. This uptick in activity increased closings in this price point in October. However, this was not the trend for homes priced lower, below $1,000,000.

The reason we are seeing this trend with the two different market types is that buyers in that higher price point are not as affected by the higher interest rates. They are willing to buy based on the news of a rate cut with anticipation of lower interest rates coming. While buyers in the market purchasing below $1,000,000 have tighter cash flow and need the actual lower rate in order to make their home purchase. When the rates did not come down, making their monthly payment lower, they continued to sit on the sidelines versus buying a home.

Due to this trend and the fact that a high majority of homes that sold in October were in that higher price point, the average sales price was higher than previous months. This is causing, in my opinion, inaccurate data to be shared on Denver’s current home value trend. For example, according to the Denver Metro Association of REALTORS® October market trend report, they are stating that the median close price in the Denver metro market is up 4.34%. However, in my opinion, the only reason this value is higher is due to the higher number of homes sold valued above $1,000,000 versus homes sold below this price.

In fact, homes that are valued below this median sales price are the homes that are seeing the fewest number of showings, offers, and closings, especially lower priced townhomes and condos. Without these homes closing, the data is skewed, making it appear that Denver’s home values are on the rise. The reality is that most homes priced below that $1,000,000 mark are, in fact, down in value across the Denver metro area, and homes in this price point are seeing major price reductions in order to attract willing buyers. Furthermore, what is not taken into consideration with current home values in the Denver metro area is the number of homes selling with high amounts of Seller Concessions. It is safe to say right now, that most homes that do go under contract under that $1,000,000 price point are doing so with anywhere from $5,000 to $20,000 in Seller Concessions, which buyers are using to buy down their interest rates.

Current market conditions create a unique market for Denver buyers that are willing to jump into the market now. Sellers needing to sell are willing to negotiate, either on price or by being willing to pay Seller Concessions, or both. This gives buyers the upper hand with both their purchase price and terms, but also during inspection. There’s an old saying regarding the stock market: the time to buy is when no one else is. This could hold true for today’s Denver area homebuyers as well. However, the window of opportunity might not stick around too much longer.

The fact is that the Feds just announced another rate cut today, and most experts agree that it’s likely we’ll see a third rate cut from the Feds in December. With the Fed rate cut today and if   the prediction for another rate cut in December is true, it’s very possible we’ll start seeing some interest rate relief for borrowers. If this happens, we could see buyers come back into the market, reduced inventory levels and once again values in Denver could be on the rise. Smart buyers should purchase their next home before this new wave of buyers and enjoy higher appreciation versus paying for it down the road.

As always, Denver’s real estate market is very complex along with overall national economic trends. The information shared in today’s market update is based on what we saw last month and educated predictions of what we might see in the future. However, there’s no guarantee the predictions are right. The only way to stay up to date on Denver’s real estate market is to read our monthly Denver Market Update blog every first Thursday of each month. Make sure to come back next month and see how Denver’s market responded to the Fed’s rate cut and if mortgage rates finally followed suit by heading downward. In the meantime, contact us today if you would like to start taking advantage of Denver’s slower real estate market or if now is the time to sell your Denver area home. We’re always ready to help!

~ Written by TK Homes CEO/REALTOR®, Trevor Kohlhepp