From 2015-18, the time a home spent on the multiple listing service in metro Denver averaged a consistently short 26 days. But last year, that average jumped to 31 days, according to the Denver Metro Association of Realtors.
And as the year came to a close, nearly 45% of the homes that sold had to make a price cut, lengthening their time on the market to an average of 70 days, versus only 15 days for those that priced correctly.
Effectively, if buyers liked a home’s price, it sold in about two weeks. If they didn’t, a seller could count on two months of agonized waiting. Chalk that up to buyers flexing some newfound market muscles.
Buyers are struggling with affordability and “want more for less” and sellers will need to “do more to get top dollar,” Jill Schafer, chairwoman of the DMAR Market Trends Committee told a crowd of Realtors gathered at Empower Field at Mile High for the group’s 2020 Economic Summit on Friday morning.
And yet, the inventory of homes available for sale tightened in a dramatic way. It dropped a record 27.9% between November and December. Given the pace of sales, there was only a 1.13 months supply of single-family homes available at the end of December, Schafer said.
A balanced market requires at least four to five months of inventory, Schafer estimates. That means buyers have a long way to go before they aren’t underdogs.
Inventory didn’t fall because sales were accelerating in the fourth quarter and soaking up supply. What happened was that homeowners listed significantly fewer properties, for reasons that aren’t entirely clear.
“There was a very large shift down,” said Gary Bauer, an independent broker and longtime member of DMAR.
Buyers might feel that sellers are striking back as they finally get some leverage by refusing to play ball. But there is no Facebook page or other forum where sellers and their agents plot counterattacks and ways to stay in power.
And any strategy of holding back legitimate supply, assuming sellers could even coordinate such a thing, risks backfiring. By waiting, sellers could flood the market with listings this spring, putting downward pressure on prices and stretching out sales times.
Given that most sellers turn around and buy a home or condo, an abnormally tight inventory doesn’t work in their favor either, Bauer said.
What could be going on is that both buyers and sellers pulled back in the fourth quarter as they tried to figure out where the economy was headed. There were serious fears of a recession last year, but those won’t come to fruition in 2020, according to two economists speaking at the summit.
Patricia Silverstein, a local economist with Development Research Partners, said unemployment in the state remains super-low and that is pushing wages up at the second-highest rate in the country.
“There is still growth, but at a slower pace,” she said.
Elliot Eisenberg, who is known as “The Bowtie Economist,” said manufacturing, energy and agriculture are all contracting. But consumers, whose spending accounts for about 68% of the overall economy, remain employed and aren’t retreating.
“We are not slowing towards a recession,” he said. And that should support for the housing market in metro Denver and elsewhere.
