Market Updates »
It is hard to believe that it is already March of 2021. It seems like just yesterday we were welcoming in the new year. The only thing that is moving faster than time are homes for sale in Denver and surrounding areas. Colorado has been experiencing a strong seller’s market since around 2012, but right now the market is making previous markets look more like a buyer’s market.
Within minutes of a home hitting the market, the limited showing slots due to COVID-19 are quickly claimed, leaving buyers wishing they could have gotten in to see the home. Within hours of the first showings, it is not uncommon for the offers to start rolling in. These offers look like no other offers we’ve seen in the past.
Almost every offer that is presented to a seller now is over list price, and in some cases, WAY over, sometimes $75,000 over list price. These offers have the appraisal gaps to back up the purchase price. On top of extremely high appraisal gaps, we are also seeing inspections being waived and buyers committing to buying the home as-is. There is a higher percentage of offers being all cash vs. financed, although this is not always the case.
Appraisal gaps and waived inspections are not new by any means; we’ve seen these added to offers for several years now. The big difference is how often we’re seeing them and the amounts buyers are willing to guarantee over appraised value. As hard as it is for a real estate agent to write these offers, these methods are needed to get anything accepted right now.
So, why is the market so hot that it’s keeping the snow away this winter? There are two big factors, extremely low inventory and record low interest rates. For example, as I write this on a Friday morning, the day of the week we would usually see the highest levels of inventory, there are currently 926 total homes for sale in the entire city of Denver, and 1850 under contract. This means there is only .5 month’s worth of inventory (keep in mind a balanced market would have 6 months worth). In other areas, the numbers are even more extreme, like in Arvada, which currently has a total of 75 homes for sale, or .3 months of inventory. These extremely low inventory levels mean there are simply no options for buyers that want to take advantage of the record low interest rates.
What will change the market conditions you ask? Well, either higher inventory levels or higher interest rates. Luckily, if history teaches us anything, the Spring market in Denver usually gives us more homes for sale, and this should help give buyers more options, creating less competition for each home. Higher interest rates, although that doesn’t sound as beneficial to buyers, will also reduce the number of those who qualify for a mortgage. Simply put, they may be priced out of the market due to the higher monthly payments. With interest rates also slightly higher this week than last, both of these conditions seem to be realistically right around the counter.