Notes from the field (February 2024)
Sellers slowly returning to the market; rates top 7% again
In January sellers put 20% more listings on the market in Denver Metro than the prior year. Total inventory in January fell year-over-year despite this uptick in new listings from last year's historic lows.
After seeing rates improve from nearly 8% in October to 6.5% by year-end, buyers got busy in January, putting 10% more homes under contract than last January.
While rates are well below October highs, they've crested 7% again this week on news that inflation cooled less than expected in January.
Have we turned the corner?
We're likely to see more home sales this year than last. Consumers are getting used to higher rates and housing experts believe rates peaked last year, but even if we've turned the corner, this turnaround will take time.
Until more homeowners have the financial incentive to list their homes, prices will continue to rise under the stress of low inventory.
Housing analyst Lance Lambert says it well: "Assuming mortgage rates don’t shift dramatically and unemployment doesn’t spike—regions where active listings/inventory remain well below pre-pandemic levels are likely to see appreciation this spring. In contrast, markets where inventory has recovered to pre-pandemic levels are more likely to experience subdued appreciation and potentially be at a higher risk of depreciation once the seasonally soft window arrives again."
Denver-area inventory remains well below pre-pandemic levels
The cliche that "real estate is local" has never been truer--some "Zoom Town" markets across the country that grew throughout the pandemic have seen the tide come out (e.g. Austin, TX), while other markets are seeing sustained demand leading to further price gains.
In Denver Metro and surrounding counties, inventory is well below pre-pandemic levels (the marker for "normal" inventory). We are starved for new listings and a tight, competitive market for the next several months!
Number of homes* for sale January 2019 (pre-pandemic) versus January 2024 by county
Prices up 5% YoY; 11.5% below 2022 peak
Home values typically dip in the 4th quarter of the year and rise through the 1st and 2nd quarters. The question on my mind is: will prices beat their Spring 2022 record? Based on what we're seeing, desirable homes are selling in less than 2 weeks and, in some cases, receiving multiple offers if priced appropriately.
Assuming no major surprises in financial markets, we expect prices to increase for the next several months before flatlining in the summer months.
Notable data from this month's report:
Prices rose year-over-year (5%) and month-over-month (2.4%)
New listings rose year-over-year (20%) and month-over-month (95%)
Months supply of homes for sale: 1.4 months, down from 1.7 in December (this is how long it would take to sell off the current active inventory based on the recent pace of sales; we've been under-supplied for more than 10 years!)
* Includes only detached single-family homes
What our clients are asking about buying new construction
Interested in a new build and want to learn about builders and neighborhoods in our area? We would love to go community hopping with you and share what we know about local communities and builders! Here are some of the questions we're often asked when clients are considering purchasing a new build.
Q: How long does it take to build a new home from a dirt start? A: 8-12 months.
Q: Can I negotiate the price with a builder? A: Builders do not negotiate much on price because they have more homes to sell; however, we can often negotiate a seller contribution toward closing costs, loan discount points, design center credits, or for items that are often excluded by builders (e.g. washer/dryer, window coverings, tech upgrades)
Q: In addition to price, what should I be considering? A: Lot premiums, design center credits, taxes. We've seen lot premiums of $0-$250,000 in recent months. You can expect to pay 10%-20% above cost on design center upgrades. While there are some upgrades worth doing through the builder, some that might be worth doing on your own after the home is built.
Q: Are new homes a good investment? A: Typically...yes! It may seem more expensive up front, but outside of picking your upgrades, you do not need to manage permitting and construction, not to mention that you can obtain a mortgage on a new home purchase, whereas it can be difficult or impossible to get construction financing on your own. If you can live with construction around you and a few other inconveniences, a new build can be right for you as long as you like the overall neighborhood, current and future amenities, location, and floor plans.
Active builders in our region:
Shea Homes
Richmond American
Taylor Morrison
Toll Brothers
Lennar
Meritage
KB
Celebrity
David Weekly
Thanks for reading! If we can help you with your real estate questions or goals, get in touch! And if you're considering selling in 2024, don't wait if you don't have to--inventory is low and, despite mortgage rate challenges, buyers are waiting for good homes! :)
Best,
Jen and Chad