After more than a year of consistent mortgage rate hikes, interest rates dropped by 0.25% in the second week of November. Along with the rate adjustment came an uptick in mortgage applications and maybe some light at the end of the home (un)affordability tunnel.
But wait, there's more to the story. The Denver Metro Association of Realtors released its November real estate market trends report, which captures data from October home sales and purchases in the area.
Seller's Market Persists But Losing Some Steam
While Denver's inventory remains tight, there's a glimmer of hope for buyers. Active listings at month's end increased by 2.63% year over year, demonstrating a slight lift in the extreme housing shortage Denver has been experiencing. And while the month-over-month comparison showed a 1.93% decrease, there's a typical slowing shift this time of year. Historically, active listings decreased by 6.97% from September to October. In other words, the active listings decrease was less than typically expected. Could the listing shortage be easing? Numbers are beginning to trend that way.
At the same time, the average (mean) number of days listings spent in the MLS increased by 14.29% year over year. However, the median days in the MLS decreased by 5.88% year over year. This notable discrepancy indicates some outlying homes spending significantly more time on the market. Because averages are more impacted by outliers than medians, a significant imbalance between the two shows us where those outliers can be found. In this case, several homes likely sat on the market longer than the rest of their cohorts, artificially pulling the average days up, while the median remained unaffected. All that's to say, median measurements are more reliable in this type of scenario. So, yes, homes are slowing their breakneck selling pace, but a bit less than it may seem at first glance.
Remember too: this data was sourced before the recent interest rate drop. The December market report will shed light on how this change has impacted the Denver housing market.
Other Market-Softening Factors
New Builds
New builds continue their upward volume trajectory. And with homes spending more days on the market, builders are becoming more creative to attract buyers. Many new build companies are now offering incentives such as including appliances and landscaping at no additional cost. These perks can significantly benefit buyers and make new construction a compelling option. On a larger scale, the increase in new builds contributes to the ever-so-slowly lifting of the Denver area's listing shortage.
A Bit More Buyer Power
With increased inventory, buyers have grown bolder in their demands during the inspection process. They now have more leverage to negotiate repairs and improvements, creating an increasingly favorable climate for buyers.
Contingent offers are also becoming more common, thanks to less homebuying competition on each listing. This shift provides buyers with the opportunity to make offers on new homes before selling their existing properties, even if they're relying on the sale for their down payment. This flexibility removes some of the fear homebuyers have experienced in past years when all-cash offers were the norm (given the sheer quantity of buyers competing for each property). This trend could further contribute to added inventory, as homeowners become less fearful of making a move without down payment cash in hand, therefore feeling like they can finally list their homes and take the next step in their homeownership journeys.
As further evidence of the decrease in seller power, 57.9% of closed transactions in October included an average seller concession of $9,390, demonstrating that many sellers are willing to provide financial incentives to close deals. These concessions can further help to ease the financial burden on buyers and sweeten the deal.
Growing Inventory Plus Dropping Rates What's Next?
The November Denver real estate market continues to skew in the favor of sellers, but with evolving dynamics buyers can capitalize on. And with the added factor of (potentially continuing) dropping interest rates, who's to say how real estate in the Mile High City will develop into 2024?
No matter where this market takes us in coming months, it's important to keep your homeownership goals in mind and work closely with a professional you can trust. Connect with one ofour Denver Realtors for personalized guidance and the latest real estate data.
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