Denver Market Statistics

Today's Denver Real Estate Market reminds me of the old joke just about every finance professor tells in college. The joke goes like this:

Three folks go in for a job interview: A Mathematician, An Economist, and an Accountant.

The interviewer asks them all one simple question: What's 2 + 2?

The Mathematician gets out a slide rule (yes, it's an old joke), works a few numbers and responds: Well, 2 + 2 = "4.00000000".

The Economist leans forward and answers: Well, 2+2 = 4, plus or minus a little bit.

The Accountant looks to the left. Then, the Accountant looks to the right. Then, the Accountant leans forward and whispers: What do you WANT it to equal?

Though our market is not quite as corny as that joke, the answer the Accountant gave just about sums up this market: "What do you WANT it to equal?"

Some might call it a mixed market. Some might call it a strong market. Some might call it a weak market. However, all might be right.

There are great spots. There are also some areas of concern, which are noteworthy. However, the areas of concern are also areas of opportunity of which one should be cognizant. Should you panic? No. However, you should keep your ear to the ground.

The Denver market is sending mixed signals. Though GREATLY outperforming the national market, the local market is constrained with the reality of a nationally weak market.

Here is a snapshot of the Denver vs. the National Market in the chart below:

 

Based on information from MetroList, Inc. for period August 7, 2008 to September 9, 2008.

Note: This representation is based in whole or in part on content supplied by MetroList, Inc. MetroList, Inc. does not guarantee nor is in any way responsible for its accuracy. Content maintained by MetroList, Inc. may not reflect all real estate activity in the market.

 

Can you see just how STRONG the local market is? The Denver market is running about ½ the months of inventory that the national market is 5.43 months of inventory for Denver vs. 11.2 months for the National market.

Here's another chart to show you JUST how STRONG the local market is:

Based on information from MetroList, Inc. for period August 7, 2008 to September 9, 2008.

Note: This representation is based in whole or in part on content supplied by MetroList, Inc. MetroList, Inc. does not guarantee nor is in any way responsible for its accuracy. Content maintained by MetroList, Inc. may not reflect all real estate activity in the market.

 

You see above that there are ONLY 24,648 active listings on market. That is 22.2% FEWER active listings on market that the peak in 2006! So, of the 5 listings you saw on market in 2006, you now will only see 4 in today's market. In terms of active listings, down is an indication of relative market strength.

Oh, and there are 4% more folks in Denver than 2 years ago, with more moving here with the traditional and renewable energy industries all the time!

Now, if you have the following, you will generally get a loan:

1. Good credit – 720 credit score or higher
   
2. Money down – 10% is good; 20% is better
   
3. A W-2 job – Sorry, stated income (self employed) is largely gone. So, if you work for yourself, it's going to be tougher to get a loan – tougher than before.
   
4. AND if you aren't an investor with more than 3 other Freddie Mac/Fannie Mae backed loans (your 4^th loan – the one you would be seeking - is the maximum you can get since August 1^st, with the new conforming guidelines).
   
5. If you meet #'s 1-4, then lenders want to speak with you NOW!
   

Now, there are areas of concern and/or opportunity. Here's why: Our Denver market is now apparently branching in two different directions:

• Average/Median Price and below – That's the market at about $280k and below (call it $300k and below for round numbers)
  
  • The AVERAGE price of a sold, single family residence was $284,531 as of August 1, 2008 (the latest date for which Denver data was available)
    
  • The MEDIAN (the price where 50% of the market sells above that price and 50% sells below that price) was $225,000 as of August 1, 2008 (the latest date for which Denver data was available)
    
  • These markets ($300k and below) are showing 4.17 months of inventory; that's a Seller's Market
    
• Now, ABOVE $300k (going to infinity), the Denver market is showing 11.42 months of inventory; that's a Buyer's Market
  
  • The market breaks down like the following:
    
    • $300k - $400k – 6.9 Months of Inventory – Buyer's Market
      
    • $400k - $500k – 10.3 Months of Inventory – Buyer's Market
      
    • $500k - $600k – 11.9 Months of Inventory – Buyer's Market
      
    • $600k - $700k – 16.2 Months of Inventory – Buyer's Market
      
    • $700k - $800k – 19.2 Months of Inventory – Buyer's Market
      
    • $800k - $900k – 19.7 Months of Inventory – Buyer's Market
      
    • $900k - $1M – 29.0 Months of Inventory – Buyer's Market
      
    • $1M and over – 33.1 Months of Inventory – Buyer's Market
      

    
     

Why the two different markets? Consider the following:

• To qualify for a $350k home or more (assuming $0 down – which isn't happening these days), a borrower(s) would need to earn $100k per year. In Denver, that represents 11.6% of the population.
  
• Using that data, along with MLS Data and some purchase assumptions (1 home purchase every 7 years), one finds the following for the Denver Market:
  
  • There are an estimated 21.71 potential buyers for each listing up to $300k. This includes folks who can afford homes over $350k; though these buyers likely won't buy less expensive homes, they are still POTENTIAL buyers.
    
  • There are an estimated 2.11 potential buyers for each listing over $300k
    
  • Based on the current months of inventory, there are 9.90 buyers for each listing in the Denver market in aggregate
    
  • A well-balanced Denver market should have about 11.86 buyers for each listing (a market with 6 months of inventory)
    
  • So, one can see that the under $300k market is experiencing "gang-buster" activity; while the over $300k market is experiencing some lethargy.
    

What does that mean to you, my readers?

• If you are buying in the market up to $300k, you should be prepared to compete and compete strongly for the inventory that is available.
  
  • Get serious.
    
  • Get ready.
    
  • Write a strong offer.
    
  • Don't act like it's a buyer's market. Why? Cuz' it AIN'T at the present time.
    
• If you are buying in the market OVER $300k, you have an AMAZING opportunity to take advantage of what is a Buyer's Market.
  
  • The latest Denver MLS (MetroList) indicates that the average, single family residence, listing price is $503,573, up from $427,067 on January, 1, 2008, (or up $9,563 per month this year). Now, that price increase, along with the static or softening average and median sold prices indicates that homes are coming on market, but are not coming off-market via a "sale path".
    
  • If they were selling in meaningful numbers relative to the market, one would see the average price drift up, followed at a later time with the median price drifting up.
    
  • So, there is one of four paths those homes will follow:
    
    • Sell
      
    • Sell short – (sells less than its encumbrances)
      
    • Comes off-market – doesn't sell, the owner keeps it
      
    • Forecloses – fails to sell and is repossessed by the bank
      
  • Given the amount of potential buyers per listing, and the MLS data (shown below) what are your thoughts about which path those listings will follow? In any of those paths, the market softness means a buying opportunity.
    
  • Indeed, in three subdivisions I can name right off the top of my head, homes are selling for 50% or more under their original prices. So, the prepared buyer is in a position to be rewarded.
    

The chart below shows the data relating to the above.

Based on information from MetroList, Inc. for period August 7, 2008 to September 9, 2008.

Note: This representation is based in whole or in part on content supplied by MetroList, Inc. MetroList, Inc. does not guarantee nor is in any way responsible for its accuracy. Content maintained by MetroList, Inc. may not reflect all real estate activity in the market.

 

So, one can see that the Denver market is offering two different faces: It's busy and frenetic median priced market and it's opportunity-laden higher end market.

If your plans include a home purchase in either market, just know I am here to help you with the information to make the right choice for your home buying or selling needs.