We thought prices might increase by 6% over the 6 week period between June 1 and July 15. And, we thought we might see a 4 to 6 week market reaction of pent up demand creating a modestly higher than average number of contracts and sales.
We were close. But, we were wrong.
We didn’t expect inventory to remain as low as it has, prices to jump quite this much or the number of homes under contract week over week to sustain at this level.
OVER THE LAST 10 WEEKS …
- The Average Weekly Sales Price has skyrocketed from a low of $483,563 to an all time high of $575,025, two weeks ago. That’s an 18.9% increase in 10 weeks. (Note: The 2020 low was $460,280 in week 4 of this year.)
- The number of weekly under contract properties have been 25% to 36% higher than the last three-year average. Last week alone was 36% higher than the same time last year with 1,618 properties under contract this year compared to 1,193 last year.
- The number of homes being listed for sale has remained at, or only slightly above the seasonal weekly average, creating a serious supply issue.
- 65.25% of all properties sold last week closed at a price at or above the final asking price and 56.74% at or above the original asking price.
The month of July will shatter any previous monthly sold records. August will likely be close to July.
CONCERN FOR SUSTAINABILITY?
Yup. However, as we look at the numbers; and really dig in, we don’t see that there is any room for prices to experience decline anytime soon, other than the normal seasonal adjustments.
Yes, we predict sensational headlines and predictions of precipitous falls. There will be signs of market slowdown, like reduced sales and average sales prices coming down. But those happen every year as far back as we have data to analyze, well over 40 years. This time of year, kids go back to school and parents want to settle in. This is a simple supply and demand issue.
But are kids going back? We see many households making lifestyle changes because they know they may never go back to a traditional work environment. Many are loving it. Some are forced. And yes, it also creates hardship. There are many people who have careers that don’t allow them to work from home and they are forced to make the decision of their children’s education versus a job. For now, unemployment benefits may be artificially buoying for some families.
Yes, we have concerns long term for the impact of serious factors such as forbearance, rent moratoriums, market liquidity, unemployment benefits, stimulus packages, resurgence of virus, social unrest and political infighting and chaos. All of these factors create questions and instability.
And yet as we look at the Denver metro area, we need to remind ourselves, there is no better, more stable, economically viable real estate market in the country.
WE’LL SEE SOME SLOW DOWN
We try to read the lead indicators. The number of showings in the Denver Metro market dropped from a high of 29,945 two weeks ago, by 6% the following week and down 8.5% this last week to 27,586. That is an 8.5% decline in activity, in human behavior. Again, typical this time of year, and it eventually leads to a slowing in the meteoric rise of prices we’ve seen. As the eventual decline in the showing trend continues, which we expect it will, prices will start to drop off, particularly on higher-end homes, as they do, each and every year.
What’s really going to happen in the Denver Metro real estate market? We don’t know. No one does.
What we do see are people wanting to live in homes that create safety and comfort, a natural reaction to the last 5 months of events. And we see relatively favorable economic and interest rate conditions for many households that allow for these moves to be made, that appear to be sustainable at least through year end.