The residential housing market in Denver Metro is running hot for almost ten years now. Unlike many expectations for it to take a break, it’s still picking up the pace a year into the Coronavirus pandemic.
This frenzied momentum led to new records, making buyers more desperate to get that contract. To get around the exceedingly high list prices, only those willing to pay extra are getting the deal.
The new norm
To vividly paint how fiery things currently are in Denver, a typical listing in Lakewood reportedly garnered 74 showings in four days and scored up to 15 solid offers from serious buyers willing to pay more than its $590,000 list price.
The new owner had to incur an additional $97,000 to win the bid at $687,000. Unlike the old times when $30,000 over the seller’s asking price was enough to secure your dream home in Denver, paying at least 16% over the list price is now the new market norm.
With Denver property sellers getting a new historic list price average of more than 104%, local realtors hint that market uptick will soon stand at 100%. That is if everything goes well.
The current range is at least 98%.
Unlike 2017’s heated market patterns where lower-priced homes were the center of the debate, the entire housing market spectrum is getting hotter by the day. For instance, those selling homes priced $1 million and above currently have the upper hand due to relatively “bigger” stock and “less” competition.
Quarter 1 performance
To highlight how the market fared in the first quarter regarding asking price, 56% of the 13,807 examined sales closed above list price. Approximately 18% sold at the exact list price.
This survey tracked 935 Denver-based neighborhoods to reveal that 17% of the local listings were above the asking price.
Given the general lack of new supplies, most of the neighborhoods only contributed one or two new listings. The least average closing price for these listings was $400,000, with many surpassing the initial asking price.
Top neighborhoods with more active home sales in the first quarter included Friendly Hills West, Seven Hills, Northhaven, Founders Village, The Meadows, Green Valley Ranch, Southcreek, and Reunion.
An increase in buying competition turned bidding wars in the Denver housing market uglier than before, making it tough to get a property, especially for those struggling to scrape for enough deposit.
Real estate economists warn that this trend might result in a “haves and have not” scenario, making it increasingly difficult for most first-time buyers to secure deals and own a home.
The current setup seems skewed in favor of those who already own a home, as they can easily roll accrued equity to newer properties. Despite having an advantage over those scuffling for down payments, realtors suggest that homeowners should focus on building equity for more than three years to get the upper hand.
With the rising market coupled with a surplus of desperate buyers, it’s increasingly difficult for sellers to avoid hiking their list price by 4% to 5%. The only downside with this move is that it discourages appraisers, increases chances for loan rejection, potentially kills off the deal, and wastes a lot of time.
Tip to survive an “insane” residential market
The best way to survive excessively agitated prices witnessed in Denver buyers need to be more logical about their offers. Since an over-the-top bid might get your offer rejected, strive to offer sellers a bid that your mortgage lender would support without question and still fits the seller’s offer.
Sellers should understand that overpricing might increase their odds of selling above the asking price but won’t work with buyers who aren’t willing to pay more than the list price. Under such “insane” conditions where a single-family property has a stay period of two weeks alone, incorrect home prices might force it to list for even a month or longer.
To avoid feeling like a rebuke, understand that average property transactions are now getting up to four offers only to sell between 1% and 2% more than the list price.
This new average is potentially perfect for generating interests faster because it also accounts for the homes selling below the seller’s asking price in downtown areas. Only 3% of the total listings in Union Station sold above list price, for instance.