June 12, 2020
After a period of uncertainty, we are starting to get a picture of what the Real Estate Market will look like. In the last article, we discuss the impact of COVID-19 and Stay at Home orders. With 700 listings pulled off the market, a 12% drop in year-over-year inventory and 50% drop in showings, people were scared. Banks tightened their belts and no one could predict how long this might last.
Fast forward to June DMAR report. After stay-at-home orders lifted, buyers came out of the woodwork in record numbers. Interest rates on conventional loans dropped in some cases to the high 2’s and transactions started picking back up. Let’s see what the month of May brought us for Single Family Homes in Denver County.
The most eye-popping numbers here are Active Inventory and Sold listings with year-over-year changes of -35% and -46%. This is expected with the stay-at-home order still in effect for the beginning of the month. However, despite the low inventory, we saw an increase of 9% in homes going under contract!
Let’s look at the median and average sale prices. Interestingly, we saw in increase in the median, yet a decrease in the average. This tells me that the significantly higher priced homes are not selling as fast as the lower, in this case, homes under $620,000.
The Signature Market (750k-999k) and Luxury Market ($1,000,000 and up) seems to be the area with the most shake up. It is my belief that the main clog in the system is the availability and criteria for lending in Jumbo market. Currently the conventional loan limit for Denver is $575,000. Anything over that either has to use cash, Jumbo Loan, or a conventional first with a high interest rate 2nd. Banks seriously tightened their belts in this category, with many disbanding their Jumbo category all together. A buyer used to be able to get a 10% down Jumbo loan. Now it seems the standard in that area is 20% down. On an 800k sale, that is an extra 80k in liquid funds a buyer has to put down!
The good news is, if you are looking for a home within the conforming loan limits, interest rates are at an all time low. Some banks and lenders are even closing loans in the 2.8%! For example, on a $575,000 loan the difference between a 3.2% and a 2.8% rate is over $100 per month decrease in your mortgage payment. Some people are using this to bump their price a little bit to get the home they really want.
The busiest selling months are usually June and July. The buyers are out there, will the inventory catch up?