Denver’s Real Estate Did Not Surprise – It Delivered
Homes are safe places providing joy, safety, and stability. As the world spirals, real estate remains a rare silver lining. Demographics and record-low interest rates drive demand while the uncertainty of jobs and schools weigh heavy on sellers. Even as builders rush to fill the market gap between buyers and sellers, their efforts will be determined by the stock market’s resilience.
Last week’s devastating U.S. Bureau of Economic Analysis report documented of the worst U.S. economic contraction of 32.9% from April to June, wiping out five years of positive growth. Negative economic indicators like high jobless claims and closing businesses are driven by the never-ending spread of COVID-19 cases.
Here’s what I see going on in the market.
Let’s start with the sellers. They’re not budging. Inventory continues to strain the market with 6,449 active listings at the end of July 2020, 31.1% less than July 2019. The uncertainty of the job market, the inability to find a replacement home, and the now the stress of homeschooling have sellers thinking twice about listing. Meanwhile, Denver saw New Home Pending Sales up 17.9% in June 2020 – 22.9% more than June 2019 – and builder confidence rallied in July to meet the suburban demand trend with smaller homes void of shared spaces.
Alternatively, buyers clamored for homes that are priced right and staged well, with 31% of detached homes selling for over asking and average days on market dropping 7.7% year over year and median dropping 36.4%. First-time homebuyers, downsizers, and investors drove the demand for $300,000 and $500,000 valued homes to close at 100.6% of the list price. Buyer demand increased for mansions as homes valued $1M+ experienced 55% more homes sold in July 2020 than July 2019, pushing the average single-family detached average above $601,863 – a 10% increase over last year.
Speaking of McMansions, the two highest-priced home sales in July were a $7-million-dollar home in Boulder and a $5.985-million-dollar home in Cherry Hills Village.
For each week in July, Denver ranked in the top six housing markets in the nation by Realtor.com’s weekly measure of market recovery – and we felt it! 6,664 homes closed in July which came from June’s record number of pending home sales, breaking the previous record of 6,230 homes closed in June 2017. Low-interest rates and pent-up COVID-19 demand pushed record-breaking, short-term stats. Demographic changes will benefit the long-term outlook by further increasing housing market demand.
Low-interest rates not only fueled demand, but gave buyers a Christmas present in July! As I noted, the average closed price for a single-family detached rose to $601,863, up from $547,537 in July 2019. If I calculate a payment at today’s 2.99% interest rate with 20% down for the median home price compared to a year ago, home buyers are now saving $43/mo.
Now is the time to stop paying your landlord’s mortgage and move into a position of wealth and stability.
What keeps me up at night? The stock market. As CNN’s Fear & Greed Index moves further into Greed and Citigroup’s Panic/Euphoria Index points towards extreme Euphoria, both point to lower stock prices within a year.
All signs point to an excruciatingly long economic recovery as COVID-19’s death toll increased to 155,000, positive cases doubled with no hint of slowing down, high jobless numbers and unemployment claims, and Yelp’s business tracker shows another 15,742 businesses closed permanently in July.
Real estate, however, continues to show strength. Looking to September’s market trends report covering August’s data, July has a potential record-breaking 7,122 pending home sales – 27.47% higher than September 2019. Dream on.
Your Partner in Building Wealth through Real Estate,
The Rueth Team of Fairway Independent Mortgage Corporation