Records Have to be Taken in Context: How the Resurgence of ‘Home’ is Impacting Denver-area Housing
It’s been quite a year, and despite all of it, or more accurately because of all of it, the metro-Denver housing market is coming out the winner.
Remember a time when we would get up, get ready for work and get out the door, returning only to have dinner, wind down and get to bed. Today, our home has become everything. It’s become infinitely more important as it’s our refuge, our workplace, classroom, meeting room, restaurant, escape and for some, our isolation.
The Denver Metro Association of REALTORS® (DMAR) October Market Trends Report highlights how this resurgence in our home has played out in the stats. Let me share a few to highlight how extreme this market is:
- We have the lowest amount of homes for sale for any September at 5,301 homes, which consequently is only a mere 950 homes more than Denver-area’s all-time inventory low
- Buyer’s put your sneakers on because homes are selling in six days, the fastest for any September on record
- And you have to be ready to pay more. Denver’s median closed price hit a record high at $461,000. Consequently, that’s more than the sellers were asking, as the close-to-list price for September was 100.41%
- Even with this low inventory, we sold 5,850 homes, more than any September on record
- With another record 6,376 pending sales teed up for October
- Sellers, I see you are trying. 6,376 new listings came on the market; but with demographics and interest rates favoring buyers, it simply isn’t enough
Denver’s real estate market has not only recovered from March and April’s loss; it has picked up the pace from January and February. As of the end of September, year-to-date closed homes were up 1.61% over last year and sales volume was up 7.53%. The median close price was up 6.9% – that’s an incredible equity win for our homeowners.
So the question is… when will this end? Or worse… will it POP?
The economy has been shaken for sure and, remember, we were heading towards a recession before COVID-19 hit our shores. But the fundamentals support our continued appreciation and strong housing market, giving buyers confidence to pay a little more to get the home of their dreams and sellers the opportunity to capitalize on their equity and move some desperately needed inventory.
On the economic front, consumer confidence posted its biggest gain in 17 years; with respondents indicating they were more likely to make big purchases in the month ahead. In fact, folks are already spending. Consumer spending was up 1.0% in August after increasing 1.5% in July. Remember, consumer spending is 70% of our GDP, which will be a strong measure of our recovery.
Personal income dropped 2.7% in August, but that reflected the expiration of unemployment insurance benefits. Wages and salaries actually increased with Denver seeing a strong 3.42% year-over-year gain. Personal savings decreased in September again due to the end of the unemployment insurance but overall personal savings is actually double what it was last year. Which makes sense given our inability to pull out our wallet for travel and entertainment.
This increase in savings and wages further support the stability of housing; the ability for homeowners to weather the current pandemic storm.
Current homeowners have another huge advantage: equity. With delinquency rates up and forbearance the topic for months now, it is no wonder people are worried about the housing bubble busting. But the equity numbers tell a different story, one of stability. The average Colorado homeowner gained $17,000 in equity last year, dropping the current percentage of homeowners who are under water to a low 1.5%. In fact, only 1.4% of Denverites are underwater. So, even if someone was at risk of losing their home, with our current above-asking close-to-list average, they can quickly sell their home on the open market and avoid foreclosure.
I am a huge fan of homeownership. I believe it gives us a place to get grounded, get involved and feel safe. But I also believe in the access it gives to build wealth. 2020 saw five of the stock market’s 50 most volatile days. As consumers, now is the time to take advantage of increased affordability through low interest rates and rising wages. As Realtors, it’s imperative to advocate the stability real estate provides our clients and identify those who need us most.
Your Partner in Building Wealth through Real Estate,
The Rueth Team of Fairway Independent Mortgage Corporation