What's the temperature of the market?
Well, not too unlike someone recovering from the flu, the Metro Denver Market is looking better everyday. However, just like someone recovering from the flu, ya' wished you felt better. Nevertheless, you're glad you're on the mend, as opposed to being on the downhill slide. Denver is on the mend and continues to gain strength.
Denver slid back every so slightly from 6.5 months of inventory to 6.7 months of inventory between March and April. However, that's NOT the bad news it seems at first glance.
First, let me review what happened, then I will review why it's not as bad as one would initially think.
This month saw continued strength in the two lowest price points:
- $1k to $100k (yes, you can buy a home for less than even $50k in Denver today) - dropped from 5.5 months of inventory to 4.7 months of inventory. That is a 0.8 months of inventory drop!!
- $100k to $200k - dropped from 5.2 months of inventory to 5.0 months of inventory.
At other price levels, months of inventory moved materially only on the high end. However, the current month under contract was 6,256 compared to the trailing 12-month average of 3,146 homes sold. That means, NEARLY A 100% INCREASE IN UNDER CONTRACT ACTIVITY!!! That increase is well-balanced at all price points, though some weakness at the $800k-$900k was noted. So, new inventory is being absorbed as quickly as it is being generated.
That's phenomenal!!!
Why? Well, because a great number of studies I have read indicate the typical buyer moves up by 50% in value between purchases! So, if you sell at $200k, chances are you will buy up to $300k. Think about your own history: Does that statistic track? I look back on my own history and it sure seems to be the case.
Now, the "why" that is positive. Well, the greater action in the lower markets is a signal that people are getting the ability to get loans and move up to the higher price bands. And even though the months of inventory grew slightly, that was a result of the normal increase in listings during the summertime. Current month under contract activity continues to grow at all levels of the market. As a result, this is an indication that normal market behaviors are occurring in the marketplace. In short, there doesn't appear to be a logjam in buying, which would indicate credit issues or unemployment issues at certain income levels constraining activity.
Overall, the market is firming up and is exhibiting predictable behaviors associated with a growing market.
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