Denver Trends for April 2020

[Chris Lopez]

April's Market Update podcast is up. Listen to the podcast or read the blog post for all the details. In the next day or two, look for a special edition of the monthly market updates where I discuss rental payments (and non-payments) with four property managers around town.

April is the first full month of data with the COIVD-19 pandemic. In addition to the monthly market stats, I want to share some great data points from the Colorado Real Estate Journal's "Impacts from previous macroeconomic downturns." It's a great article on multifamily in Denver. Below are a few sections that I highlighted:

Here are the Denver MLS stats for the month:

The Denver MLS trends data for April 2020 is out. Comparing year over year (April 2019 to April 2020) is better than comparing the previous month, because we have defined seasonality trends.

ACTIVE LISTINGS

• Pretty close to same as end of April 2019, -2%
  • Homes -6%
  • Condos +8%
• However, with fewer buyers in market, the MOI (months of inventory) went up
  
  • Still a seller’s market, more favorable to buyers at entry and mid prices (around 1.8 MOI for < $300K, which is up from around 1.0 MOI)
  • Moved from slight seller’s market to slight buyer’s market in luxury
  • YCRE defines luxury as $900K+, that’s the most expensive 10% of the market.
  • This MLS report's top bracket is $1MM+, the MOI for that segment is 7.1… buyers market.

NUMBER OF UNITS CLOSED

• Down 31% in April ’20 vs April ‘19
  • Homes -28%
  • Condos -37%
• This makes sense; the slow down has been most pronounced under $300K (mostly FTB first time buyers) and top 10% luxury. Condos are skewed to more affordable product.
• Mid-market ($300-900K) has been strongest
• Dr. Yun, the economist at NAR, expects unit count for US to be down -13.5% in 2020 vs. 2019
  • I suspect Denver will also be down, but not quite a much as the US average.

UNDER CONTRACT

• Down -46%
• Expect May closed volume to be off -40% to -55%
• Unit counts will start to recover in June, assuming all of the Denver metro counties allow showings by mid-May.
• Around six weeks ago, I expected 50-60% declines in May, so this is better than I had expected.

AVERAGE PRICE

• Up 2%
  • Homes -0.3%
  • Condos +4%
• I sent an email a few weeks ago predicting a decline in house prices due to "mix variance."
  • That is, we’re selling fewer luxury homes than we used to, so the average goes down...
  • ...Even though the "typical" entry level home price still went up.
  • That (barely) happened this month. Expect to see it for a few more months.
  • The media will lose their mind over this, which may unnecessarily alarm clients.
  • You'll need to be the voice of reason to explain what the media is incapable of explaining.
    

MEDIAN PRICE

• Up 5%
  • Homes +3%
  • Condos +7%
• If you arrange every sale in order from cheapest to most expensive and take the value of the one exactly in the middle, you have the median price.
• In times where you have mix variances, the median price is a much more accurate representation of what is really going on than the average price.
• Condos prices were up more than homes due to a reverse mix variance.
  • First-time buyers have really retreated from the market.
  • The % of condos that sell in the most affordable price brackets has dried up
  • Plenty of mid-market ($300-900K) condos are still selling.
  • Some of the slow down in luxury is there are fewer jumbo loan products for the time being
  • There are not that many condos in "luxury" over $900K, so the softness in lux impacts homes more than condos.

DAYS ON MARKET

• Down 31% (several days)
  • Average 19 days for homes
  • Average 23 days for condos

DISCOUNTS

• Average home sold for 99.96% of list price
• If you have a buyer writing on a home with <30 DOM, don’t expect a discount.
• If > 60 DOM and if in a slow segment (< $300K or > $ 900K), push hard for a discount.

DISTRESSED PROPERTY SALES

• In April there were only three bank-owned properties sold in the Denver metro. In 2010 there were 612.
• YTD there are 26 short sales. During the same time in 2010, there were 1,191 short sales.

There are three ways to get the Denver Real Estate MLS Market Stats details:

• Listen to it on the "Denver Real Estate Investing" podcast
• Watch the YouTube video
• Read the blog post

Enjoy!

Chris

Chris Lopez
Investor-friendly Realtor
Your Castle Real Estate
303-548-0846
DenverInvestmentRealEstate.com

[Erin Spradlin]

@Chris Lopez - Excellent post with some great points about what is happening with Denver real estate across condos, single family homes, entry and luxury properties. Additionally, the info on how Denver rents and Denver tenants are responding is useful in studying the markets as people consider investments in Denver and rents on that investment.

Re your comment about pushing for a discount on homes sitting for 60+ days, it has been my experience that this push can actually come closer to the 21 day to one month mark. Certainly in 2019, I think sellers expected a 2018 crush of offers, etc. and would start to negotiate far more after it sat for a few weekends and they had the absence of those offers... Even though that was sort of the norm across the board, I feel they had been primed to expect lots of offers and a certain insecurity set in fast. 

While I think everyone is trying to be smart about the Denver homes and Denver condos, I also think Denver sellers are still having difficulty shedding the mindset of the past 5 years and the expectation of multiple offers. The onset of uncertainty is also creating a need to dump homes. Trying to be sensitive here about people's circumstances but as someone that primarily represents Denver buyers and Colorado Springs buyers in what has been a sellers' market, it has been refreshing (and honestly more fun as an agent) to see my clients get a little more bargaining power.