If you are a regular reader of my newsletter you know that it is a great way to get current with the state of the metro Denver real estate market. I like to provide you insights, opinions, observations, and most importantly, hard data to help you make one of the most important financial decisions of your life: whether to buy or sell a property. You may have noticed a theme in my newsletters over the years that I do not jump on the latest rumor of interest rate increases (or decreases), the market being about to crash (or skyrocket), or any other hyperbolic screeds you see on so many other real estate blogs and newsletters. Just the facts, thanks – that is my motto.
That being said, let’s begin by taking a look at the April Market Overview provided by the Denver Metro Association of Realtors. What you see from the past couple of months is a market with increased inventory, resulting in a year-over-year price increase that has begun to slow down and now sits below the long-term average of 6 percent per year. By no means should we be overly alarmed by this data. The market is still very strong – days on market has decreased significantly from March’s numbers by -12%.
The increased inventory (11% higher than March 2019) and lower Days on Market is certainly what I would expect to be a bridge to an even stronger real estate market. While it is only the past couple of months that have exhibited this slowdown in appreciation, a higher inventory of properties on the market will eventually lead to a market more favorable for buyers.
To put the inventory of homes for sale in better perspective, take a look at this chart. The yellow line shows the number of properties on the market every month going back to January 2007. The blue line shows the number of sales every month. During the downturn between 2008 and 2010 was an astronomical number of properties for sale (over 26,000 at its height!) which caused a huge buyer’s market and a crash in prices. Starting around 2010 and picking up in 2011 the inventory began falling and the market became balanced. Since 2012 there has been a dearth of properties on the market resulting in our super strong seller’s market. This is exactly how markets are supposed to work, ebbing and flowing over time.
Over the past few months we have had a small but noticeable uptick in the inventory. There are currently 7,012 properties on the market, the highest number we have seen for the month of April since 2012. You can see we still have historically low inventory, but if the number of homes on the market continues to rise over time to the 15,000-17,000 mark, we will sooner or later return to a balanced market.
The last graphic I want to show you is a metric that Your Castle invented years ago which compares the average number of showings per listing per month. Basically the higher the number, the stronger the real estate market. A higher number means there are either more showings per month, fewer listings on the market, or both. The opposite is also true. A lower number means either there are fewer showings per month, more listings, or both, which translates into a weaker market. The number of showings/listings/month decreased slightly in April down to about 16, but looking at trends from previous years, we can deduce that this is quite normal for the season. Also contributing to the decrease in showings is the increase in inventory that I keep mentioning. Buyers now have more homes to look at and tend to spread many of their showings between multiple properties.
So, putting all of this data together would suggest that the market has certainly not lost its strength recently! No one (no matter what they say!) knows for certain what will happen over the coming months and years but you can rest assured that we will be tracking the Denver real estate market closely and reporting back to you every step of the way. Please give me a call if you want to chat more about this. I am always happy to talk about our super exciting, ever-changing real estate market!