The Denver housing market continues to astound buyers, sellers and Denver Realtors alike. Denver home sales soared two record levels, rebounding from April’s lower sales due to Covid 19 lock-downs. The number of homes placed Under Contract/Pending in May 2020 surpassed both April and May 2019. Simultaneously, the number of homes for sale actually declined. The stats are in: this May turned out to be a great month to sell a house in our market.
In spite of new in-person showing restrictions imposed by the state of Colorado in May, buyers came out in droves this past month. Unfortunately, the inventory of existing homes for sale also decreased from this time in previous years. Many eager home buyers faced competitive, multiple offer situations on homes they liked. Often, those homes would sell within days or hours of being listed for sale in the Denver MLS. This resulted in many homes selling above the asking price. Therefore, the average price in the month of May compared to list price was 100%.
Unfortunately for buyers, that has become common scenario in the last few years. Many potential home-buyers hoped that the interruption in showing homes (and overall market skepticism) would slow activity and lower home prices. So far, that is simply not the case. Instead, home-buyers faced increased competition in May over the previous month. Often, the winning bidder for a Denver resale home has had to offer 3 to 10% more than the list price. So, how could the average price still remain at only 100% of list? The answer is that older listings, many of which were in distressed condition or undesirable locations, also sold for several percentage points below the list price, balancing out those hot new listings. Generally, those listings generating multiple bids were priced below $700,000 and located in better neighborhoods closer to downtown Denver.
Denver Luxury Housing Market
Luxury homes priced above $1 million for sale provided a tiny exception to those rules. While those high-end homes continued to sell in record numbers in May, sold prices to list prices ratio dropped to 98%. So, home buyers of luxury homes had slightly more negotiating power. But still, good homes priced in the $1-$2 million range sold quickly and even with some multiple offers above list price.
In the last week, our Kentwood DTC office alone sold 9 luxury homes priced above $1 million. Several received more than one offer and one sold above full price. All of this indicating that even the luxury real estate market has started to catch fire. This fire will continue to build as more buyers (those who has just sold their home) enter into the market and “trickle up” to the next level of home purchase.
Jumbo Loans for Denver Luxury Real Estate
One reason the luxury home market has been slow this Spring is higher interest rates in the jumbo market. At times, these mortgage interest rates have risen above 5%. Now those same mortgages rates have dropped down in the low 4% range. But, most home sales above $1m now usually sell for all cash or at least 50% down-payment.
So, what can we expect next? It’s hard to say whether or not the typical Spring real estate rally will extend beyond the Fourth of July. Usually, it doesn’t. But, seeing that we may have lost many sales in March and April due to Covid 19 restrictions and fears, the rally might continue through the summer. However, the market will eventually need an uptick in inventory of homes for sale to sustain this rally. More sellers will have to bite the bullet to take advantage of this selling opportunity. Otherwise, some buyers could become discouraged by the the lack of an adequate selection of homes to buy and drop out of the hunt altogether. Choices are already dwindling and buyer frustrations are high.
Bottom line: Lower interest rates created lower payments for home-buyers. Even the Denver luxury real estate market is catching up now. And, potential sellers might not want to miss the window of opportunity to sell fast and for the highest price.