The Denver MLS trends data for April 2021 is out. Comparing year over year (April 2020 to April 2021) is better than comparing the previous month, because we have defined seasonality trends.
We all know it’s a great time to sell, but it’s also a great time to buy. Data shows that prices will still increase and with interest rates so low, buying now will allow you to tap into equity later. In Denver, we usually see a seasonal uptick in active listings around this time, but that doesn’t appear to be happening this year. Active listings for April were 2600, considerably lower than the average of 14,900 for the past 20 years. Closings were up 28% compared to last April, though the pandemic slowed things down at that time.
Our clients are going from 2-3 offers before going under contract to about 5-7 offers. Successful offers are going to be over list price, but it’s important to keep in mind that you are paying for the property at market price, not list price. From a long term, wealth building perspective, our clients are still setting themselves up for success.
New Format for Monthly Market Updates
These monthly market updates are part of a new series we’re launching on YouTube called Drinks and Deep Dives with Chris Lopez. In it we cover
- Networking and learning with local experts
- Market updates
- Deal analyses
You can find the podcast for this market update within that podcast episode called New Show! Drinks and Deep Dives: Market Update, Multi Family and Office Deal Analyses. Tune in Wednesdays at noon MT to join me live for the next one.
- Listen to the podcast “New Show! Drinks and Deep Dives: Market Update, Multi Family and Office Deal Analyses” on the Denver Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post.
Key Takeaways from April 2021 vs. April 2020
Here are the April market stats and some ideas and observations. Lets look at April 2021 vs April 2020.
- Active listings
- 2,600, down 62% from prior year
- Average number of listings in April is 14,900.
- Up 35% from prior month, which would follow the seasonal trend this time of year.
- Number of Units Closed
- Up +28% from last year (April 2020 was the start of COVID’s impacts hitting the market)
- Down -3% from last month. Usually, we see more sales in April than March, so that’s unusual.
- Average price
- Up +24% from prior year; pretty consistent with what we have been seeing lately.
- As always, some of this is a mix variance of more big homes and fewer small homes getting sold
- However, a decent portion of that big increase is just – higher prices.
- Homes had more of an increase (27%) than condos (17%)
- Days on Market (DOM)
- Down -38% from last year, to 13 days.
- Homes continue to sell a little faster than condos
- That fast sales pace in April was even a bit faster than it was in March.
What will happen next?
- Consumer confidence continues to improve, so eventually skittish first time sellers will trade up
- More people are vaccinated, so some sellers that were worried a for health reasons might list
- Number of buyers applying for mortgages is still very strong
- Showing traffic in April (and all of this year) was really strong
- Under contract listings on 4/30 was 5,900, a lot better than last year (of course) and up 6% from a month earlier
Near term, no changes.
Normally late summer and early fall is a good time for buyers. I’m curious to see how long the party lasts; I bet it’ll be a strong buyers market for the rest of the year.
This is a really important idea:
It’s not that there is “no inventory.” It is more accurate to say that there is a lower amount of standing inventory, which means buyers will need to act quickly to purchase a home. We do have inventory – it just doesn’t stick around for more than a few days.
This is always a good idea – writing offers on “stale” listings (which might only be a few weeks old):
To find more inventory, try taking another look at homes just outside your price range (lower and higher). If a home at a higher price point has been on the market for more than a few weeks, they may be willing to take a lower offer. At lower price ranges, a buyer may have the flexibility to make thoughtful updates over time.
Unfortunately, we likely can’t build our way out of the shortfall of inventory in the near term:
The price for 1000 board feet of lumber on the Chicago Mercantile Exchange hit yet another high at $1300.00\1,000 bd ft. A year ago, the same contract was $328.50 and in September 2009, it was just $163.60. Nothing is forever.
Why are Lumber Prices So High?
There are plenty of trees; we have a shortage of sawmill capacity. I don’t know how long it takes to get permits, design, and build a sawmill, but I bet in 3-5 years or so we’ll solve the problem. This article provides one example of a sawmill being built in Winona, Mississippi.
To give a sense of the scale of the problem, this new sawmill can make 350,000,000 board feet of finished lumber a year. A typical house needs 16,500 feet. So that’s enough to build 21,200 homes a year. About the right amount for Denver! There are around 550 sawmills in the US; I bet we need to add 20 or so. That might take a few years.
Source: The above executive summary is from Lon Welsh of Your Castle Real Estate.
Denver Housing Trends April 2021
Showing per active listing trends for Denver
Quarter 1 Rent and Vacancy Report
According to the report from the Apartment Association of Metro Denver, the vacancy rate went down a little and rents were up slightly. That’s the average. Downtown didn’t do as well (10.9% vacant), and the rest of the metro did better. No surprises there either.
Concessions are up. That’s also not a surprise and mostly is driven by newer projects (again, mostly downtown). We’re on pace to absorb 11,000 units this year. I don’t recall how many deliveries we have, but that should be pretty close to the right pace. The absorption rate is pretty comparable to 2016 to 2020.
Keep in mind 4Q and 1Q are usually worse for the landlord. The summer (2Q 3Q) is better for the landlord.
Good news – – the majority of respondents said their results showed less than 5% of tenants not paying.
Get Started Building Your Own Rental Portfolio
For information on how to get started investing in Denver, check out our 2021 Denver Real Estate Investing Guide. You can also sign up for our free Real Estate Investing Newsletter and download free real estate spreadsheets and toolkits.