All cash offers. Bidding wars. Offers with unlimited escalation clauses. Refrain from home inspections, with the exception of health or safety deficiencies. Unseen listings sometimes within minutes of a home being put on the market.
Denver home buyers have been using all of the above strategies for the past several months as they attempted to land a property in the middle of a market for steroid drugs that can only be described as a sellers’ market.
“That is unknown in my story on the market. I’ve never seen it like this, ”said longtime Denver real estate agent Billy Van Heusen, who has held a Colorado real estate license since 1972. “Everything is out of whack and there is no inventory.”
The latest report from the Denver Metro Association of Realtors (DMAR) shows just 2,075 active listings as of the end of May – a record low and 71% less than in May 2020. Average single-family home and condominium sales prices hit a record high of $ 623,279. And the average market time sank to just 11 days – less than half as much market time as a year ago.
Buyers and agents have described the market as emotional, frustrating, extreme, and at a rate never seen in the Denver non-coastal market.
“Denver was probably running out of inventory before that, but I don’t think there has ever been such extreme demand,” said Jenny Usaj, an agent for Denver for 15 years and a member of the DMAR Market Trends Committee. “The demand to live in Denver seems unstoppable.”
The agents also pointed to the extremely low interest rates that are creating opportunities for first-time buyers and increased savings created by the COVID-19 pandemic shutdown of all travel and group meetings. Many people are also reluctant to sell their houses because they fear that it will be difficult to buy another in this market, which means there are fewer houses on the market.
Three big city buyers spoke to the Denver Gazette about their recent experiences. While two of them have successfully found a home, the third is still looking after eight months.
“It’s very successful,” said LeAnna Efird from Denver. “To be honest, we haven’t looked around at all in the past two weeks. We’re just so frustrated and don’t want to do it now. We just need a break. “
Efird, a healthcare worker, is in a unique situation. She looks after her mother, who has health problems and had to move in with her. They sold their mother’s condo in September and tried to find a ranch-style house with a basement so everyone could have their own space. You lived with friends, in a long-stay hotel and rented a house – which is only available until July.
“It’s not like we don’t have any money,” she said. “We have pre-approval and have to take 40% off. But we still weren’t the best deal. We’re not sure what to do. “
They lost bids for about eight houses, even if they made a higher bid but lost to a purely cash offer. You are looking for homes in the $ 500,000 range but are unwilling to overbid extreme amounts or forego inspections.
“People have outbid so much on houses it’s impossible for us to keep up,” said Efird. “You have to book shows as soon as they hit MLS (Multiple Listing Service) or you won’t get any shows. Many demonstrations only last 30 minutes, giving you around 15 minutes to make a $ 500,000 decision. That’s crazy.”
Andrew Malkoski of Denver 100 said this is why it is important to work with an agent who knows how to help you structure offers that compete with cash.
“Between things like escalation clauses and valuation gaps, there are so many ways to make a credit quota look more like a strong case,” Malkoski said. “It’s important for them to remember that salespeople have different motivations, it’s not always price. And sometimes we don’t know what it is.”
Usaj advises buyers on the three Ps: “Be prepared, patient and persistent”.
“It’s moving fast so buyers have to be ready to leave when they’re in the market,” she said. “Make sure the finances are in order. Have proof of money when using cash. If you need to liquidate a 401 (k), do so beforehand.
“This market is not for everyone.”
Amelia Abernathy moves with her husband Will and young daughter Haley from Tennessee to Denver in July because of Will’s job. She is also pregnant with twins and immediately identifies with the concept of an “emotional” market.
“It was pretty brutal,” she said. “Many tears flowed. … but our broker (Van Heusen) was super positive and said ‘we will find something for you.’ “
The couple, who found out about their move in April, put down security deposits on six building plots out of desperation, but didn’t really have the time to wait for a new building.
“We had a budget of $ 700,000, but because of all the overbidding, we looked at homes in the $ 500,000 to $ 600,000 range,” said Abernathy, who works for a financial services company. “We started making a few offers, but we were very hesitant … we didn’t want to pay $ 100,000 above the asking price.”
Van Heusen typically calls salespeople on new build projects to see if any bids for homes under construction have failed.
“Some of the builders out there have waiting lists that are 100-200 people,” said Van Heusen, a former Denver Broncos punter and wide receiver in the 1970s. “In this case, Amelia was lucky.”
A buyer had withdrawn and the house was about to be launched. The broker asked how quickly Van Heusen could get its customers there. He rushed to the settlement near Southlands on E-470 and East Smoky Hill Road, video-called Amelia and Will through. They made a bail and got the house. It will be ready in July.
Both Van Heusen and Usaj said the market doesn’t appear to have hurt economic development efforts as companies are still moving to Denver and hiring new employees. They may only offer longer rent subsidies to give new residents time to find a home.
“The tide lifts all ships, as the saying goes,” said Van Heusen. “Despite these prices, companies and people are still moving here.”
“I haven’t really seen any company or company holding back or worrying,” Usaj said. “Most employees who see a chance to move to Denver grab it.”
Paul Phillips is one of those people. He came to Denver from New York last year to help a friend run a startup. Despite renting, in December Phillips decided it was time to invest in Denver’s real estate market and reached out to Usaj.
“It’ll only take a while,” he said. “The inventory is so low, it just takes patience.”
After living in markets like New York, Boston, and Calgary, Phillips said, “The prices here don’t look that crazy to me.”
He made a few condo offers, most of them $ 50,000 to $ 60,000 above the asking price. When he finally found a condo in Denver’s Five Points neighborhood, he and Usaj quickly moved.
“I saw it on Thursday, gave them the offer on Friday morning, and put in a clause that they had to accept by Saturday morning,” he said. “You accepted … we have the last one.”
He spent just $ 10,000 over the asking price of $ 600,000 for the two-bedroom apartment. He thinks the investment is good.
“In this market, you almost never have an attitude towards what you want – you have to be open to everything,” said Phillips.
Usaj sees no relief in sight for buyers.
“It will be a very busy summer,” Usaj predicted. “I don’t see this inventory problem being resolved. There were 2,500 on the market last month. The balance for a market of this size should be 36,000 – we are quite a long way from that. “
The only thing that could rebalance the market, the agents said, is if the Fed hike rates in the fall. That would create a smaller pool of first-time buyers who would qualify.
“Inventory will catch up quite a bit, but I don’t see any dramatic negative impact on prices,” said Van Heusen. “As the amount increases and people continue to immigrate, Colorado’s market will remain strong. It is the basic economic supply and demand.”