There is a dirty myth floating around Denver right now, that there are no homes for sale. Wrong. There are plenty of homes that are, have been and will be for sale. You’re just not fast enough to get one of them.
Take, for example, 1650 Dahlia in Park Hill: back in March, we listed Dahlia for $419,000 on a Friday and sat back and waited for the two dozen offers to roll in, which would hopefully get us to full price.
As it turned out, a blizzard hit two hours after hitting the MLS, dashing the open house planned for Saturday morning and any hope for the mayhem my sellers and I so morbidly desired. As it turns out, you only need one offer. One enterprising Realtor convinced her buyers to strap on snowshoes and weather the Friday storm once she heard about the numerous showing cancellations and the open house.
Before the open house was supposed to have started, my sellers accepted an offer for $425,000, and closed without incident 30-odd days later.
The buyers had been waiting for months for south Park Hill, which is why they were willing to spend a bit more for this location, but they were missing on houses left and right prior to securing 1650 Dahlia. Note what the one buyer said: “they were missing houses left and right.” That means that they weren’t sitting around waiting for Kentwood to list 1650 Dahlia. They were up to bat, taking swings at other opportunities. So, yes, there are houses on the market; it’s just none of them are staying on the shelf long enough to be counted as “inventory.”
Inventory talks about unsold property that is active at the time when the nerds come through with their counters and chart movement. And, like any retail operation, inventory costs money because it gathers dust, and you have to pay for space to keep it. So when you hear that inventory levels are down 70+%, or that we’re at all-time lows in available houses, you can interpret that as the market has a ton of buyers looking to lock in an artificially low interest rate before everything blows up in our face. They just have to be particularly aggressive to get their house.
Interestingly enough, sales numbers haven’t dipped at all. In fact, sales numbers that ebb and flow with the seasons have been eerily consistent over the past 4 years. Believe it. See the chart. Blue line – inventory. Red line – sales. Home sales figures are consistent, yet “inventory” is down?
So is the Denver real estate market inflated? Well, buyers are paying a premium for homes, but they accept that the premium can be offset by the sub-4% interest rate within a few years of taking possession. Plus, $5,000-$10,000 over asking price is a small price to pay over 30 years than paying 5% every month v. 3.5%.
Most of this love/hate duality comes from the misconception that hidden somewhere within all this exuberance is a free lunch for a buyer or seller. There isn’t. Some buyers are reluctant to compete with others because they feel like they are overpaying for a home that could go down in value. Well, that’s true no matter when you buy the house; plus, if you would rather rent while you’re on the sidelines, notice the ridiculously low vacancy rate in Denver right now. Talk about overpaying? I have friends in the multi-family construction business that still can’t believe that they are able to get away with more than $2/foot in rent. This is 100% higher than levels in 2009. There is a good chance that the gold rush will continue as long as interest rates are low. Denver is the country’s most popular city with dozens of people moving here every day. And I don’t think any of them moved here to rent forever.
Conversely, many itchy would-be sellers are waiting for this crazy gravy train to make their homes shoot up even more in value so they can reap the same benefits as their neighbors. Again, don’t try to keep up with the Joneses. Their profit is tied to their individual life decisions. And if they bought before or after you – in more favorable market conditions – they have a different baseline. Think about early 2001, when you were waiting for your dot-com portfolio to double… again! It didn’t. Chances are that your home has never been more valuable than it is today, regardless of what the market thinks of its value.
Of course, if you are a seller, you wield considerably more power than buyers. Put your house on the market and see what happens. Psych! Not really selling… but you probably will when you see what you can get for your house. Back in Chicago in the mid-1990s, I advised a lot of my friends to do the exact same thing. It worked because they got over their fear that nobody would want to buy their home. Most of them sold; some did not. But they all achieved clarity.
If you’re a buyer, I’m not gonna lie, you need a pair to buy a home these days. You can’t be in it 75%, 85% or even 99%. There is going to be someone up to the challenge of cutting out of work, waking their baby from a nap or walking off the golf course to find the house they want. Are they crazy? No, they’re committed. If you want to dabble, wait for the interest rates to go up; of course, your payments will also increase by 25-50%, but at least you can finish your round.
Karl Lueders is a Denver Metro Association of Realtors Million-Dollar Roundtable honoree, as well as a 5280 Five Star Realtor. He can be found in traditional ways: if Twitter, G+ and LinkedIn are the new traditions. Calling Karl Lueders 720-971-8267 also works. Especially if you’re planning on living in or leaving Washington Park.