Real estate markets are cyclical, continually shifting over time from buyer’s market to seller’s market and back again. As a natural transition, the economy will influence the shift, sometimes intensifying the overall effect. As the Denver real estate market begins to move away from the extreme seller’s market we have experienced for the last few years, it may seem the adjustments are bold. In comparison to historical markets, however, the changes are modest.
Massive Changes in Inventory
The hot seller’s market we have been experiencing in Denver has been due to a lack of inventory, meaning the limited number of homes available for sale. From 2011 through 2013 the huge surplus of homes on the market was purchased by newly eager buyers. Coming off the worst recession in recent history, in June of 2011 there were 34,730 detached, single family homes on the market. The market shifted quickly, fast forwarding five years to June of 2016 with 9,341 homes available for purchase.
Having 25,000 fewer homes on the for sale, and more buyers eager to purchase, the market got competitive. Then consider the massive influx of new residents to the area in the same time period, and builders, coming off a difficult economic stretch, were slow to gear up and start building more homes.
The New Norm
Multiple years of this intense seller’s market became the norm with homes selling as fast as they could go into the MLS. Prices steadily, and sometimes rapidly, climbing month after month setting new pricing records put sellers squarely in the driver seat and buyers in a competitive panic. Selling homes was quick and easy and we became quite comfortable with the way the market worked.
Now, as the market slows down, modest changes seem much bigger from the levels we are accustomed to. Yet it’s all in the perspective. The average number of days a single family home sat on the market in June 2011 was 89 days, compared to June 2016 where the number was 26. But here’s the rub. In June of 2019 the average number of days on market was also 26. No change from three years prior.
It’s in the Perspective
This isn’t to say the market hasn’t adjusted. Clearly is has. The number of available single family homes has risen 6% from September 2017 to September 2019. Condominium and townhome inventory is up 31% over the same time period. While not the massive fluctuation from the 2011 inventory levels, it is enough to give buyers more purchasing options and keep them from feeling the pressure to make immediate decisions.
The Hyper-Local Effect
One of the changes we are seeing through the shift is the location factor coming into play. Attention on very specific areas, known as hyper-local markets, has some neighborhoods more active than others. Price, location, type and age of the home, are all distinctions that are currently giving some neighborhoods more activity than others. This doesn’t mean homes in less active neighborhoods won’t sell. But they may be less likely to have multiple offers or could stay on the market a little longer. Of course there is no way to control the hyper-local effect either. Buyers are the ones dictating the hot and not-so-hot spots in Denver.
As we see the shift happening in Denver, we can look back to 2011 and see what an extreme buyer’s market looks like. Our modest shift still has us in a seller’s market for the time being. New home builders continue to build and have more communities planned for the coming years. The Fall outlook for the Denver market is still solid, with existing home prices continuing to creep upwards even with an increase in inventory.