Has the cold front moved to Denver’s hot real estate market?

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The Metro Denver housing market has undergone a shift in recent weeks, not unlike the cold front that is ending a record heat wave, and, according to local real estate agents, could provide significant relief to buyers if it continues.

“The market has started to move in the last two to three weeks and has been very visible to most agents over the past seven days,” said Bret Weinstein, founder and CEO of BSW Real Estate in Denver. “A market shift is absolutely happening.”

While a popular ad could have attracted over a hundred impressions and 15-20 serious offers earlier this year, now even “great properties at an affordable price” can see 30-40 exhibitions and three to four offers, Weinstein said.

Of course, at any point before the pandemic, this will still represent a stable market. But for buyers who are tired of bid after bid and lose, any form of containment will increase their chances of getting a home.

“This is still a very difficult market for buyers — it was exhausting,” said Brady Miller, CEO of Trelora in Denver. “Over the past two weeks, we have seen some signs of relief. We don’t see 12 to 15 sentences. There are more houses on the market and prices are leveling out. “

The recession isn’t just happening in Denver. Time display, which manages ad scheduling for more than 1.5 million active ads, saw a significant drop in activity in May compared to April in 28 of the 30 cities it monitors, including Denver.

“Despite the fact that traffic continues at a historical pace, we are seeing a significant monthly decline compared to April levels,” said Daniil Cherkassky, chief analyst at ShowTime. “As we stated last month, even if demand starts to wane, we will still be far from a buyer’s market as demand for real estate remains at unprecedented levels.”

Weekly impressions in Colorado, which were up 50% more in April from the first week of January, nearly dwindled in late May. They recovered in June, but the growth rate is only about 20%, which is a small fraction of the typical growth in June compared to January, according to ShowTime.

In addition to making it easier for buyers to obtain display space, buyers should also start paying attention to the wider range of homes to choose from and the ability to view properties more than once before deciding to place an offer. And when it comes to offering, they’ll have less competition.

“Over the past two weeks, we have seen 3,600 new homes entering the market, the largest increase in supply since the pandemic,” Miller said.

But he admits that the problem last year was not the number of new listings, but the degree of takeover or the share of listings announced. This year, by the end of April, 95% of new ads were absorbed, which Miller said is “outrageous” compared to the more normal absorption rate of 60% to 70%.

The absorption rate fell to 84% in May and is approaching 74% in June, which Miller called much more reasonable.

Weinstein said the larger market appears to be unaware of the shift, given that three home bids on average could be as strong as the 15-20 bids made earlier this year. Frightened buyers, out of habit or despair, continue to unnecessarily raise house prices against phantom competitors.

“We are currently seeing the best offer wins between $ 20,000 and $ 30,000 on the assumption that there are other offers at that higher price when in reality there are none,” Weinstein said.

Another sign that the market is slowing is that fewer and fewer estimates are coming back compared to the price negotiated between buyer and seller, said Nicole Ruet, production manager for The Rueth Team at Fairway Independent Mortage Corp. in Englewood.

When buyers are willing to bid well above the list price, appraisers can struggle to determine the correct home value, which in turn makes it difficult to approve a mortgage.

About two months ago, 27% of ratings in Colorado were low, Ruet said. In June, the share of missing assessments approached 10%.

June tends to be one of the strongest months for home sales, and price increases can peak during the holidays on July 4th or later. So what explains the Denver market slump in May?

For some people, the urge to socialize and travel after the relaxation of restrictions may have distracted attention from finding a home, Weinstein and others argue.

Mark Whitner, senior economist at Wells Fargo, adds that as more employers call workers back to the office, the appeal of working remotely in Denver or buying a second home in a resort town in Colorado may fade away.

“Now that people are thinking about going back to work, we are not seeing an increase in the number of people leaving the West Coast,” he said.

Witner and others argue that home affordability has become a bottleneck for the residential real estate market after skyrocketing price increases offset an advantage that caused mortgage rates to plummet last year in terms of lower payments.

“We cannot allow prices to grow by 20% per year. Such price increases are not sustainable. Revenues are not growing close, and interest rates will not fall. Affordability is a real problem in many parts of the country, ”he said.

And Denver’s tumultuous metro market may have just led to more potential. buyers burn out

“I think the reason for the decline is high price fatigue. Disappointed buyers and their brokers give up, ”said Tom LaRock, partner broker at Your Castle Real Estate, of the decline in sales he began to notice in the second half of May.

Other market breaks in the past year have been temporary, and it is possible that more buyers will return to the game, leading to the situation escalating again in August or later. But if the number of affordable homes starts to grow, this trend could be successful.

Roughly one in five potential sellers cite low stocks of homes to buy as a key reason they delayed listing their properties, according to the data. survey from Homes.com… Just 22% of them said their home was simply not ready for sale or that they were waiting for a better time to root out their families, while a tenth waited for the pandemic to subside.

In theory, a quieter market could encourage potential sellers to be more willing to list their homes by increasing inventory. The trend can become self-reinforcing. However, it won’t take long to warm up the market, given how little supply is available.

“Given that we have about 2,000 homes on the market, we only need about 10,000 buyers in a city of 3 million people to have five buyers per home,” Weinstein said. “But for now… there is a change. For those sellers who think that the market will continue to grow forever, this is not the case. “

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