Homeowners experience unprecedented growth in equity
With a large increase in month-end active and new listings hitting the market, a slight seasonal shift will positively impact buyers who have started to feel fatigue in the residential market. At the same time, current homeowners continue their unprecedented growth in equity.
With a historically high average sales price of $705,812 and increased interest rates, many buyers who saw their potential monthly payments drastically increase have received a sign of reprieve. Month-end active inventory went up 81.16 percent from February to March. The additional 995 new listings on the market at the end of the month also served to slightly aid the balance of supply and demand. While the percentage increase is substantially higher, having such low initial numbers yield a higher percent change. Along with the 43.57 percent increase in new listings, this will serve to help balance the accelerated price appreciation the market has recently seen.
Earlier in the year, buyers offered six figures above the asking price while competing with dozens of offers, according to a spokesman for the Denver Metro Association of Realtors (DMAR). With the recently increased inventory, it is more common to compete with just a few offers. Although competition has loosened, the residential real estate market has always been slow to react to change. Even with only a few competitive offers, it’s become standard for buyers to come in very aggressively on offers, making the other offers starting at an elevated price and terms. With record-high sales prices, interest rates increasing north of 4.5 percent and an average close-price-to-list-price ratio of 106.46 percent, the monthly mortgage of a traditional buyer has never been higher, says the DMAR.
The Denver market currently sits at 19.88 percent appreciation compared to last year. While waiting may create more options, it does not guarantee more value. Last month alone, the average sales price increased 9.02 percent at $58,418. The market continues to move forward rapidly, just not as fast as the past couple of months, and the decreased speed will be felt in the coming months, creating the allure of more balance.
In the luxury market (homes priced at $1 million and higher), buyers saw the largest rise in inventory of any price point. House hunters in the luxury market felt some relief from the historically tighter market with a 58.22 percent increase in the detached market and a 60.53 percent increase in the attached market for the number of homes available for purchase from February.
Even with the rise in inventory, bidding wars persisted, with luxury homes going an average of 7.66 percent over the list price. The average luxury home price increased 7.8 percent month-over-month, as it has done since the beginning of the year.
Offers of $300,000 over asking price were not uncommon, with one home we know of closing $600,000 over list price, according to the DMAR. The dramatic escalations in prices of expensive homes may intimidate some buyers, leaving them feeling that the market is reaching its peak, and they should pause their search in hopes that prices will stabilize. But sellers need to stay grounded in their pricing strategies as buyers can sense when a house is priced too high, even in this hyper-charged market. We are seeing sellers get carried away with the price frenzy and end up losing out, according to the DMAR.