Heat in the Morning, AC by Noon
Denver's market isn't "set and forget" just yet
Like the climate control in your car, the temperature of home buying season in Denver can change on a dime. Like its namesake, sometimes we skip spring altogether and head right for the 90-degree days, while every now and then, our summer flowers freeze before the leaves begin to fall. Recent numbers released by the Colorado Association of REALTORS® indicate that like years before, fall has come early this year. As seasons change, the focus remains on inventory.
While we may not have the heat on just yet, we’re certainly using less air conditioning. Despite positivity in the number of new listings coming to the market, our inventory of active listings has dropped since this time last year. How could inventory decline if new listings are up – you might ask. The two numbers mean very different things. Just because more cars end up on a lot, doesn’t mean more are selling. In our handy-dandy thermostat analogy, just because the heat comes on, doesn’t mean you will get warm. For the Metro Area, the amount of new property coming to market was up just shy of 8 percent from August of 2017; higher for Denver County at 9.3 percent. While this nearly 10 percent increase over last year sounds tremendous, remember we were also in this same shortage last year (and the year before that) … kind of the “half of nothing is still nothing” thought we can consider.
It is important to note with these positive numbers is the rate at which the inventory is consumed or the month’s supply of inventory. At just 1.5 for Denver County, the goal is to reach something much closer 4.0 to achieve a balance – not the 16.7 percent decline year-over-year that this number represents.
Additionally, and perhaps most poignantly, the gap between inventory for sale and the number of new listings tells the truest tale. In Denver this August, single-family inventory was down year-over-year just more than 15 percent – and even worse for condos which are down 22.5 percent. What seems contradictory is that while inventory of available homes isn’t just down – but way down – the number of new listings is actually up – way up at 9.3 percent. Statistically speaking, this number indicates that the moment a well-priced, marketable home arrives on market, it’s gone again. August statistics reporting days on market until sale remains unchanged from the previous month at 25 days. The number of new listings should look closer to 25 percent year-over-year to indicate even the slightest decline in the insatiable demand. This is not dissimilar to a heavy and consistent snowy season in the mountains affecting summers in the city over the long-term.
One of the questions heading into the election season seems centered on the issue of controlling growth through legislation or allowing business to respond with supply. You likely have an opinion headed into November and many candidates are offering their solution. With opposing views affecting our housing market in vastly different ways, the results will certainly affect the temperature of our market moving forward.
With lower demand comes lower housing values and as we have seen in the past, declining values affect so much more than the brick and mortar. With supply skyrocketing comes the higher density, traffic, and crime that this scenario entails. Either way, Denver remains the place to be, the place your friends and employers alike want to be. As we shift from small and unpopular to sustained and growing, Denver moves to an economically warm place to live.