Reality of Real Estate Rates - August 2023 Denver Metro Market Report

The Denver Metro market is experiencing a seasonal shift mirroring historic real estate cycles in which the market's seasons taper off into the second half of the year. While new listings increased week over week by 0.9%, year over year, new listings have decreased by 14.1% keeping inventory tight in the Denver Metro area.

The Denver Metro area experienced an extreme surge in pricing during the pandemic. As such, Denver has become one of the most expensive cities in the West. However, we're starting to see the market begin to correct itself. Median close price for the Denver Metro area, dropped slightly this month (1.58%) to $590,000 - showing signs of market correction and a move towards affordability. Close-Price-to-List-Price-Ratio dipped below 100% for the first time in two years, to 99.81%, showing signs of market correction. The last time we experienced a ratio below 100% was in the first year of the pandemic, 2020 at 99.67%.

It's clear we've slowed down, but historic data shows this July is still better than the average from 2013 - 2019, indicating the Denver market is still relatively strong compared to historical numbers. Buyers are still in the game and as savvy as ever, despite interest rates not behaving as they should. This month, 37.6% of units going under contract had to make a price reduction, roughly by 5.3% or an average price cut of $41,045. Contingent sales are increasing in popularity, most notably including post occupancy agreements to combat the struggle of low inventory. The average number of showings for a buyer to go under contract remains at 13 showings. In the first half of 2023, the market experienced a range of 11-16 showings to go under contract.

Though inflation decreased in the United States this month, the national average 30-fixed mortgage rate ended July at 7.04%. There are impactful external factors that are important to account for as to why rates continue to struggle:

• Commercial Space Vacancy: The crash of the several banks including the Silicon Valley Bank and data showing that almost a quarter of office mortgages must be refinanced in 2023, means that the refinanced loans will have higher interest rates and payments despite increasing office vacancy, making the risk for some lenders - to great resulting in a strain on the office sector.

• Ukraine and Russia Conflict: Continual conflict and world-wide involvement have put a stress on many vital resources for trade and global commerce.

• Inflation pressures of a tight labor market: Initial jobless claims hit the lowest levels of the year with 227,000 total claims according to Bloomberg.

• A resilient economy: Despite cost of living increasing and inflation, consumers are still spending. They're more picky than before, but they are swiping their credit cards. GDP remained strong and durable goods experienced an impressive increase in orders by almost 5%. We want to slow down the GDP to avoid additional rate hikes.

With 64% of could-be buyers staying on the sidelines until rates drop, the Denver market is in a holding pattern that has slowed our market to a crawl. But one thing's for sure - Denver's real estate market is resilient. We can afford to be a little more patient and persistent. Data and strategy are the key ingredients to landing on top in the current market. Work with your real estate data expert to ensure you have all the knowledge to be successful in your real estate pursuits.