The real estate market in Metro Denver has been hot for nearly a decade, so no one would blame it for taking a breather, especially a year after a pandemic. Instead, the breakneck pace has only accelerated, shattering all kinds of records, including how much buyers are willing to pay above a seller’s asking price.
Gina Roth, a New Era Group agent at Your Castle Real Estate in Denver, learned how hot it would be earlier this month while on a listing for a Lakewood home. The property had 74 screenings and 15 serious offers from buyers in less than four days, all above the list price of $ 590,000.
How desperate were the buyers? The winning bid was $ 687,000, a premium of $ 97,000 or 16% above a carefully considered offer price.
“$ 30,000 above list price used to be awesome,” said Roth. “It won’t finish now.”
It is usually not a given that sellers will actually get the asking price. A more typical pattern is for sellers to do their best to get the initial price right and then drop in price a little to close a deal, said Steve Danyliw, a member of the Denver Metro Association of Realtors’ Market Trends Committee and local real Real estate agent.
“When the market is up, we can see that number in the 98% and 99% range. If things go well, we’ll see 100% or just above it, ”he said.
But in March, Metro Denver sellers averaged 104.1% of list price, a new record.
And in contrast to 2017, not only houses in the lower price ranges will be offered in another hot phase of activity. Now it’s the full spectrum, including over $ 1 million worth of real estate, where sellers have the upper hand.
“This is a crazy market like never before,” said Lon Welsh, founder of Your Castle Real Estate in Denver. To help agents understand what’s going on, his company created a heat map of the Denver Metro that shows how much revenue was higher than the asking price in the first quarter.
Of the 13,807 sales in the first quarter, 56% were sold above list price and an additional 18% were sold above list price. Of the 935 neighborhoods surveyed, 158 or 17% had any listing above the asking price. Another 150 had sold between 75% and 99% of the homes above their original price.
Granted, in many of these areas only one or two listings came on. But in the Seven Hills neighborhood of Aurora, all 17 listings were above list prices, selling for an average of $ 401,000. And in Lakewood’s Friendly Hills West neighborhood, all 13 closed deals were above the original price. The average closing price there was $ 475,000.
In Thornton’s Northhaven neighborhood, which had 53 sales in the first quarter, nearly nine out of ten sales closed above list prices. Other locations with active sales and the highest percentage of homes above asking price were Founders Village and The Meadows in Castle Rock, Green Valley Ranch in Denver, Southcreek in Englewood, and Reunion in Commerce City.
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Many first-time buyers struggle to scrape together enough to pay down a home that a market where bidding wars become heated works against them and makes it much harder for them to land property.
“We create a number of belongings,” said Ali Wolf, chief economist at Zonda, during a real estate market update on Wednesday. “People who already own a home are fine. When you are trying to break into the market it becomes a lot harder. “
Roth said many of the buyers she works with are existing homeowners who can convert equity from their current homes into new properties. Even so, she advises them to stay for at least three to five years, and much longer if they can.
“They know they are paying too much and that it stinks,” she said. “But the hope is that the market will keep rising and they can hold onto the property for a while.”
If buyers are so desperate, why don’t sellers just list 4% or 5% more than comparable sales in the region would deem justified?
One danger of getting too far ahead of the market is that appraisers will not endorse the price, which can result in a lender rejecting a loan application, abandoning a deal, and wasting a seller’s time.
But there is an answer to that too. When a seller realizes they can question and reject an exaggerated bid, more and more buyers are bidding to bridge the gap between the asking price and the value of a mortgage lender that a mortgage lender thinks is worth.
In addition, a certain psychology works to avoid becoming too expensive. In an underserved market, correct pricing is a better chance of generating interest and sparking a bidding war. As more buyers show up, there is a greater likelihood of paying above estimate if necessary.
“By pricing, we’re letting the market do its weirdness,” said Roth of her Lakewood listing. “We were able to get a buyer to completely waive the valuation.”
For buyers who can’t swallow the idea of paying above list price, one strategy is to pursue offers that are priced too high and are still ongoing. In a market where the average single family home is only listed for two weeks and where many homes are sold over the weekend, sitting outside for a month or more can feel like a reprimand.
“You hear about these houses getting 100 screenings, 24 offers, and $ 100,000 above asking price, but that’s the exception to the rule,” Welsh said. “The typical transaction receives three out of four offers and sells for 1% to 2% above list price.”
And there are still areas where houses are mostly below asking price – an apartment downtown, anyone?
In the Union Station area, 47 of the listings sold below list price, 25 at list price, and two above list price or 3% of total in the first quarter. Typically, condominiums are less popular than single-family homes, and expensive urban locations are less prone to bidding wars than cheaper suburbs.
Other heat measurements
The percentage of homes sold above list price is just one way of measuring activity in the market. Every quarter, Danyliw compiles a table that measures the average annual price increases for houses sold, the change in sales volume and the changes in the average days a listing spends on the market, by zip code.
While comparisons will be difficult in the second quarter due to last year’s stay-at-home orders, the property market was largely intact until mid-March last year, Danyliw said.
The top five hottest zip codes in terms of price hike in the first quarter were Lowry’s 80230, up 79%; 80128 for Meadowbrook Heights, Stony Creek, and Columbine Hills, up 41.4%; 80210, which covers parts of Platt Park, University Park and Wellshire, gained 31.9%; 80433 covering Conifer, plus 27.1%; and 80138, which cover East Parker, Ponderosa East and Canterberry, rose 25.9%.
The mix of houses sold in any given period will affect the average price, and really big gains or declines often present special situations, Danyliw said. This is true of Lowry’s 80230, which has seen new sales dominated by cheaper projects in recent years. With these deals, the high-end properties bought in previous years now dominate again, which explains the big jump in prices that went hand in hand with an unusual increase in market days.
On the flip side, one-tenth of the Denver subway zip codes saw price declines. Lakewood has some hot neighborhoods, but 80215 area code was the coldest in terms of median retail prices, which fell 8.3%. This area includes the neighborhoods of Applewood, Cedar Crest, and Heverly Heights.
Other zip codes that are losing 5% more of median retail price in an otherwise emerging year are 80403, which covers Tablerock, Mesa Meadows, and Coal Creek Canyon; 80465 to Morrison, Homestead and Willowbrook; 80223, which covers the districts of Valverde, Baker, Overland and Athmar Park, and 80237, which covers the DTC area of Hampden South and North.
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There were five zip codes where sales in the first quarter increased 50% or more from Q1 2020, which is usually a sign of more new homes and condos coming onto the market. These include 80216, including Globeville and Swansea; 80218, including Alamo Placita, Cheesman Park, and City Park West; 80233, which covers the districts of Valverde, Baker, Overland and Athmar Park; Park Hill’s 80207 and Lowry’s 80230.
One of the most amazing statistics is how quickly home sales have accelerated in some areas. Listings spent an average of 25 days in the market in the East Highland Ranch neighborhood, 80130, in the first quarter of 2020, but only an average of four days this year.
They went from 34 days to six days in the Central Highlands Ranch and Backcountry neighborhoods (80126) and from 55 days to 15 days in 80007, including West Woods, Leyden, and Candelas.