“How is the Denver real estate market doing?”
That’s the question I’m asked most frequently by potential buyers and sellers alike. The simple answer is: “Much better”. But it’s important to remember that there is no one monolithic Denver real estate market. It is made up of a lot of local markets in different neighborhoods, different price ranges and all with different conditions.
First, here’s the good news. Residential home sales increased more than 15% over the previous month. And, under contract sales increased 6% over May. Perhaps most surprisingly, the prices paid for the homes sold actually increased by 6% in June but are still 3% below prices paid a year ago. Then, the Denver real estate market was flooded by forecloses and distressed sales.
Prices paid for homes purchased at increasing all year. This is due to the increased sales in homes priced under $200,000. Investors have been flocking to these homes that are often distressed sales in record numbers. They can buy a house and a low interest rate, make some cosmetic updates and be able to read it at a premium rent.
Now, first-time homebuyers are competing with these investors for some of those same homes. First-time homebuyers are rushing to cash in on the $8,000 tax credit being offered by the federal government. This is not a deduction. This is actual cash money returned to buyers. So, these first-time homebuyers and investors are bidding up the prices for these homes.
Now here’s the not so good news. Most of the increase in sales and the increase in home prices can be attributed to homes sales in the lower price ranges. Homes priced from $300,000-$500,000 have not been selling as quickly or at generally inflated prices. Still this segment of the market is held up pretty well and appears to be recovering.
It appears that there may be some influence on this market segment from the sellers of homes under $200,000. After all, these people need somewhere to go and not all of them will become renters. Certainly some will. Those moving out of four closed homes are more likely to become renters than buyers. But, not all of the homes sales under $200,000 are distressed sales. Some people are moving up.
However, the chart shows that there been many fewer sales in luxury homes above $500,000. It seems that the” trickle up theory” stops somewhere around $500,000. Prices are now softer in these homes offered for sale. Home sales and prices above $1 million are even slower. And, homes priced above $2 million are moving extremely slowly.
It appears that real estate trends across the country are similiar to the June home sale results in Denver. Tucson, Buffalo and even Michigan have shown improvements in their markets.