November was another strong month for residential real estate in the Denver Metro area! The market continues to set new records with record low inventory and strong demand. With that said, we are seeing seasonal adjustments in market activity. Make sure to check out the risks towards the end of this post. Let’s take a look at demand, supply, average sales price, and months of inventory.
Demand is still quite strong in Denver. We listed a house in Aurora that had 32 showings in 1.5 days and 14 offers.
The showing activity was even with last year at this time with 72,367 showings for the month. This breaks a 5-month streak of record-breaking showing activity.
The data shows 4,622 buyers had contracts accepted by sellers on homes in November. The volume of contracts represents an increase of 18.4% YOY. Closings are up 24.2% compared to this time last year with 4,966 closings. The seasonal slowdown will continue in December and January.
It was really interesting to see the drop in showings, contracts, and closings earlier this year but that was followed by an equally interesting pent up demand of activity. When comparing year to date sales of 2020 with 2019, the total transaction volume is up 6.6% in total. This means the market not only made up for the lost time in the Spring but it surpassed it!
We still have a lack of willing sellers in this market. Active listings are down (41.6%) from this time last year. I spoke to a new home sales associate over the weekend, and he said they had a line of people waiting to see the models. The lack of available properties has been and will continue to put additional pressure on buyers. More buyers will consider new construction because they won’t have to bid against other buyers.
Congress has lowered the Canadian tariff on imported lumber to help ease the large increases in prices of lumber. Even so, the cost of new homes will continue to rise.
Average Sales Price
Strong buyer demand, low interest rates, and a big gap of inventory has put upward pressure on prices. The average sales price for November is up 11.2% to $535,167 compared to this time last year. This includes condos, town homes and detached single family properties.
Months of Inventory
The months of inventory measurement helps us to see what kind of market we are in. Low months of inventory gives sellers the upper hand. High inventory gives buyers the upper hand. As of November 2020, we have 1 month of inventory. We have been trending at this level since June.
Some of the risks to the real estate market worth watch are: 1. If the new administration cuts tax deferred 1031 exchanges, 2. If mortgage rates rise too quickly, and/ or 3. The full impact of Colorado voters repealing the Gallagher Amendment. One industry professional believes residential property taxes will increase 50% in the next valuation cycle which is 2021. Time will tell…
Final Thoughts and Risks
All in all, demand is still strong, supply is still low, and pries are still increasing. The economic indicators appear to be pointing to increasing prices for Q1 and Q2 of 2021. We will continue to monitor and report on our market activity.
Here is a link to the slides:
Here is a link to the 2 minute video: