Broncos Tickets: Part Of The Offer?

In Homeowners by Doug Phelps

We recently experienced a prospective buyer who was unable, or unwilling to go higher in purchase price with their offer on our seller’s home.  Instead, the buyer included their coveted, Broncos season tickets as part of the proposed purchase contract. 

Whether you are a Broncos fan or not, this is indicative of what buyers in the greater Denver real estate market feel they must do to be competitive. 

They’re gettin’ creative. And they’re gettin’ aggressive. 

While a seasoned agent and smart seller would rarely let this sort of enticement influence the winning bid, it does tell the story of current market conditions. 

Sellers in the Denver real estate market have most of the power right now.  

Buyers Viewing Homes

While this is an unglamorous stat, the number of buyers viewing available homes for sale is one of the greatest leading indicators of demand. So far this year, the number of viewings is literally off the charts.

Total home showings by year
Showings per listing

The average home is receiving almost 2.5 times as many weekly viewings as years past and the total number of showings is breaking all time records.  

Rising Home Prices and Bidding Wars

Buyer activity has driven Denver metro real estate prices once again to an all time high. 

Over the last 30 days, the sold price for a single-family home averaged $628,000, or 19% higher than the same period of time last year at $527,600.

Average home price for detached homes

But seriously, how crazy is the market, really?  

C.  R.  A.  Z.  Y.

Over 76% of all homes are currently selling at or above the seller’s asking price.

Sold Price vs Original List Price

What Are We Watching: Monetary Policy and Interest Rate Impact

A better economy, fiscal stimulus package passing the Senate, positive unemployment signs and GDP growth estimates rising are causing the equities and bond markets to respond.  The result for the housing market is another modest increase in mortgage interest rates by about .25% for a 30-year fixed home loan.  

While this may not seem significant, there are two notable factors. 

  • First, buyers who were already stretching their purchase price to compete may not qualify and or begin to feel uncomfortable with their monthly payments, thereby dropping out of the market. 
  • Second, this may be the beginning of a trend for rising interest rates and if it is, we may be looking at the leading edge of softening demand. 

However, we believe interest rates would need to rise well above 4% or more to begin appreciably impacting demand in the Denver Metro real estate market. 

Homes: Under Contract

If an interest rate rise does influence the Denver real estate market, we would most likely see an immediate impact on the number of properties going under contract.  

So far, the modest rise in rates over the last 60 days has had zero negative influence over buyer activity and the number of homes under contract. However, some buyers may be panic purchasing in anticipation of rising interest rates.  

In fact, the Denver metro area has had a record 9,413 homes under contract YTD, 7.5% more than the same period last year.

Under Contract Listings Graph

Inventory

In order to achieve a balanced Buyer and Seller market, inventory would need to rise to 12,000 or more homes available on the market. Current inventory is approximately 2,300 homes available for sale. 

Unfortunately for the Denver Market, only an average number of sellers are listing their home for sale, keeping inventory levels historically low given the prolific number of buyers. New home listings are actually lagging 1.4% behind last year and 3.5% behind 2019.

New listings by week graph
Graph showing inventory by week by price groups

Conclusions

As we continue to analyze the fundamentals of the Denver real estate market and broader U.S. economy, we continue to arrive at the same conclusions. 

Until there is a significant rise in interest rates, markedly reducing the number of buyers in the market, Denver metro real estate will continue to have very low inventory, be competitive for buyers, and home values will continue to appreciate. 

We anticipate this trend throughout 2021, barring major economic shifts.