By now, the sprinkler system has been blown out, the outdoor patio furniture has been stored for winter, and the lawnmower has been winterized; summer is over and fall has settled in across the Denver metro area. This means many are thinking about the quickly approaching holiday season and even the new year. Whether you’re excited about the cooler temperatures and waiting for our first snow or you’re already looking forward to next spring like me, the year is quickly coming to an end in Denver, Colorado. What does this mean for Denver area home sellers and homebuyers? It should not be a shock to hear that home values across the Denver metro area have been sliding the last few months, and current conditions haven’t put a stop to that trend.

Denver area home sellers are continuing to see fewer showings on their homes, which naturally results in fewer offers. Buyers actively looking to get into their next home before the holidays are taking their time and seeing many homes before making a purchasing decision. This means sellers are having to continue to be patient and wait for the right buyer to fall in love with their home before seeing an offer. Often, sellers that do see an offer are having to be open to accepting below asking price offers with seller concessions. These concessions are common as buyers look to secure rate buydowns and make their homes more affordable, especially as interest rates remain elevated, almost always above 7%, with many buyers locking in rates around 7.25% or higher. With these trends, home values are continuing to slip, however, not at rates that many homebuyers would expect.
 

In recent months we’ve seen 1% to just over 3% month over month of lost value. However, with greater number of homes for sale, many buyers are hoping for more off the list price and/or larger seller concessions to help make homes more affordable with the higher interest rates. The reason we’re not seeing home values slide further is mainly due to the nature of Denver area home sellers.

Unlike previous Denver depreciating real estate markets like 2007/2008, Denver home sellers today are not being forced to sell—or at least, not forced to sell quickly. Because they aren’t in a position where they must sell, they are slow to reduce their asking prices. If prices get too low, many choose to remove their home from the market completely rather than continue dropping the price. Because many Denver sellers opt to keep their asking prices high—either letting homes sit on the market or pulling them off the market entirely—values are not slipping as much, at least on paper. However, just because closed sales aren't showing significant value loss doesn't mean true depreciation isn't there; if every seller dropped their price to what a willing buyer would actually pay, recorded home values would show a much steeper decline. In the long run, if sellers are able to remain patient, it could help keep Denver-area home values higher. However, if more Denver sellers find themselves in a position where they have to sell, regardless of price, we could see much quicker and steeper depreciation.

For buyers this creates a unique buying opportunity, especially if they find a home with a seller that’s truly looking to sell their home and accept that their home’s value is not what it used to be. These sellers are going to be more likely to negotiate on the sales price and be more willing to give seller concessions to help with a rate buydown or closing costs. However, today’s buyers need to understand that not every Denver seller will fit this criterion, and many are not willing to negotiate significantly below their asking price. If a buyer loves the home, they may still be willing to pay the seller’s asking price or close to it, but most sellers are finding this is not the case.

With the current market conditions, TK Homes is watching the market closely to see what happens next. Historically, we see waves of buyers entering the market in between the upcoming holidays, followed by a steady increase in buyers entering the market after the first of the new year. We will be closely watching buyer activity and seller patience in the coming weeks for signs of what to expect once the holidays are behind us, and we welcome in the new year. So, be sure to check back the first Thursday of each month to learn in real time what Denver’s real estate market is doing. As always, if you’re ready to sell, buy or invest in a Denver area home, contact us today and let’s talk about a strategy to make your real estate goals a reality!

~ Written by CEO/REALTOR® Trevor Kohlhepp