Denver Market: Keeping Pace with 2013?

There are some truths that everyone knows: (1) You don’t tug on superman’s cape. (2) You don’t spit into the wind. (3) Denver real estate prices are moving up strongly due to the low inventory of homes on the market.

By now, everyone except Rip Van Winkle has heard a lot of news about Truth #3. So we won’t dwell on that. Suffice it to say that the average sale price is up 11.9% for single family homes and up 7.8% for multi-family properties (condos and townhouses) as of the end of July this year.

Those percentages are based on a year-over-year 12-month rolling average, which is just a fancy way of saying it is based on a statistically valid method that shows true price trends. Prices really are going up. The average buyer in July of this year paid $373,977 for a single family home and paid $223,327 for a multi-family property in metro Denver.

When it comes to sales price, therefore, the market is out performing 2013 by quite a bit.

The sense in which 2014 is keeping up with 2013 may be a bit surprising: We’ve sold almost as many homes through the first seven months of 2014 as we did in the same time period in 2013. The Metrolist MLS system shows 32,376 closed transactions through the end of July this year versus 33,387 for the first seven months last year. That is a decrease of only 3%.

That may, at first blush, seem a little counterintuitive. How can we be selling as many properties as last year if the inventory is so low?

Undoubtedly, the answer has to do with the fact that we have a lot more people interested in buying this year than we had in 2013. Sellers are just as numerous as last year; it is the glut of buyers that makes them appear to be scarce.

To put it in economic terms: Stronger buyer demand is masking the fact that we have a normal supply of sellers.

Think of it this way if you are not an economist: It’s like having a bucket with a hole in it. The garden hose, putting out just as much water as it always has, never fills up the bucket because the water is running out the hole as fast as the water is coming in the top. You’ve got the same amount of water (sellers) but the hole (more buyers) is draining the water as fast as it comes into the bucket (the market).

The good news is that buyers are being successful at getting into a house at about the same rate as last year. The even better news is that there are a lot of people that want to sell the house they are currently in and buy another one.

We’d like to talk to you people in that latter category. You can help bring some balance to the market, especially if the house you want to sell is in a price range or geographic area where supply and demand is particularly out of whack. You can contribute valuable inventory to that market  segment and you may be moving to a price range or area where supply and demand are in a bit more normal pattern.