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November 2019 NEWSLETTER Denver Real Estate Moguls
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Denver Real Estate Market
Home sellers stretching for every last penny
in metro Denver
Homes facing a price cut now outnumber new listings
By ALDO SVALDI | The Denver Post 11/16/2019
Home sellers in metro Denver appear to be trying to squeeze every last drop out of a historic run-up in prices. But in doing so, they risk getting squeezed themselves.
In the past seven days, through Thursday, 1,433 new homes and condos came on metro Denver’s multiple-listing service. But in that same stretch, 1,539 listings underwent a price decrease, notes Anthony Carnesi, CEO and manger at Keller Williams Realty DTC.
“The number of price reductions in the six-county area is greater than the number of new listings,” he said.
That’s a rare occurrence, and when Carnesi first spotted it in August, he thought it was an aberration that would quickly resolve itself. But the trend of overpricing has been at play for 14 straight weeks, and he is speaking out.
Normally, listing price adjustments spike when the market is turning and prices are on the decline. Sellers and their agents find themselves caught off guard by a “real” price decrease.
But that’s not what is happening right now. The median price of a home or condo sold in October in metro Denver rose 5.8% over the past year and is up 1.8% over the past month, according to the Denver Metro Association of Realtors.
Carnesi describes the phenomenon as a “false” price decrease, driven both by greed on the part of sellers and agents unwilling or unable to provide a realistic listing price.
Some sellers may think no harm, no foul — let’s try to get as much as we can. But mispricing a home off the bat can cost a seller in a delayed sale, or in extreme cases, no sale.
Listings with a price reduction spent an average of 59 days on the market, whereas one that was priced correctly sold in an average of 14 days, according to the Denver Metro Association of Realtors.
Of course, “correct price” is self-defining. Sellers may not realize they have mispriced until they test the market.
What are some signs a price was set too high? A key one is a lack of traffic at showings. Agents are steering their buyers to listings they consider a better value.
There are also cases where interested shoppers do show up, but they don’t make an offer, meaning they don’t view the price as reasonable given other alternatives.
After botching the initial listing, sellers need to make a dramatic gesture to get buyers interested again. Offering token slivers of price reductions won’t do the trick, Carnesi said.
What makes the mispricing so frustrating is that most sellers are sitting on huge equity gains following a near doubling in home values in metro Denver this decade.
That is much different than at the start of the decade when seller equity was so depleted many had to drain the bank account to complete a closing.
There are other signs of a market shift. A year ago, one out of three homes that went under contract with a Redfin agent in metro Denver had received multiple offers, according to the Seattle real estate brokerage.
But in October, only 6.8% of metro Denver homes on the market received multiple offers. Nationally, the number of homes on the market receiving multiple offers dropped from 38.7% to 10.2%, which represented a 10-year low.
Fed cuts rates a 3rd time this year but signals likely pause
By CHRISTOPHER S. RUGABER | The Associated Press 11/1/2019
The Federal Reserve cut its benchmark interest rate Wednesday for the third time this year to try to sustain the economic expansion in the face of global threats. But it hinted that it won’t likely cut again this year.
The Fed’s move reduces the short-term rate it controls — which influences many consumer and business loans — to a range between 1.5% and 1.75%.
A statement the Fed released after its latest policy meeting removed a key phrase that it has used since June to indicate a future rate cut is likely. This could mean that Fed officials will prefer to leave rates alone while they assess how the economy fares in the months ahead.
The immediate reaction in the stock and bond markets was muted as traders awaited a news conference from Chairman Jerome Powell.
The third rate cut of the year has partly reversed the four hikes that the Fed made last year in response to a strengthening economy. That was before rising global risks led the Fed to change course and begin easing credit. Lower rates are intended to encourage more borrowing and spending.
Earlier Wednesday, the government estimated that the economy grew at a tepid but steady 1.9% annual rate during the July-September quarter.
The job market remains sturdy, with the unemployment rate at just 3.5%, the lowest in 50 years. On Friday, the government will report on employment growth for October. Steady hiring and decent wage gains should help underpin consumer spending in coming months, keeping the economy expanding. That could keep the Fed on the sidelines.
The housing market has also improved, after slumping in 2018, thanks in part to the Fed’s rate cuts. Mortgage rates have fallen more than a full percentage point from a year ago, on average, for a 30-year fixed rate loan.
That’s helped boost sales of existing homes while sales of new homes have soared. Auto purchases, another interest rate-sensitive industry, have also picked up.
Denver Rental Market
Exploding the Myths of Today's Denver Real Estate Market
MICHAEL ROBERTS Westword 11,.13,.2019
Over the past year or so, there's been debate aplenty about whether Denver's real estate market has finally started to cool off after being red-hot for the past few years, and if the transactional environment has actually become friendlier to buyers than sellers.
There's no single answer to these questions. But Megan Aller, a sales representative for First American Title Insurance Corporation who's been working in the area for the past thirteen years or so, is an exceedingly authoritative voice in the discussion. Each month, she issues a Denver metro market report filled with an astonishing array of data. And based on these figures, she believes that while conditions have improved for those wishing to purchase a home, reports of a full-scale transition are overstated. Right now, in her words, "it's a slightly less harsh seller's market."
Aller knows all about the roller-coaster tendencies of home-selling in Denver. "I had the pleasure of starting out at the very top of the last market," she says. "I rode it all the way to the bottom, and then up to where we are now."
More recently, inventory has increased, and that's resulted in increased price reductions and concessions, particularly on more expensive properties. Simply put, Aller says, "sellers can't be as aggressive in their pricing strategy because there are fewer people who can afford to make these purchases."
Circa 2012, she explains, "our average prices were roughly $300,000, in round numbers, and with a 10 percent appreciation rate, that meant prices were going up $30,000 annually. We did that for three years in a row. Then it went up to $400,000, and last year, it crested at $500,000. So to keep up that rate, you'd have to go up $50,000 annually. That's an accelerated price growth curve that's not sustainable. Now, house prices are going up roughly $35,000 a year, and that results in an appreciation rate that's lower than 10 percent."
This slow-down "is likely a good thing," she feels. "With a healthy appreciation rate, we're trying to beat inflation by 1 or 2 percent. If we could squeak out a 3 to 3.5 percent appreciation rate with inflation sitting at less than 2 percent, homeowners should be able to make their monthly payments, and they're naturally building equity. But our average rate has been 4 to 5 percent, and it's been 9 to 12 percent over the last six or seven years. That's nearly three to four times what a good appreciation rate is, so we've been very spoiled in Denver."
Denver Commercial Market
Downtown Westminster Transformation
The city of Westminster is partnering with developer Schnitzer West to bring 650,000 square feet of office development to the U.S. Highway 36 corridor in Downtown Westminster.
The first building, which is in design, will include ground-floor retail with six to seven stories of office space above. It is anticipated to comprise about 180,000 square feet and be developed on a speculative basis, although, “That can change if a build-to-suit tenant or leasing activity ramps up over the next six to 18 months,” said John Hall, Westminster economic development director.
Downtown Westminster is a 105-acre development site on the west side of U.S. Highway 36 at the Sheridan Boulevard interchange. It houses Alamo Drafthouse, 600 residential units that are either completed or under construction, and a 125-room Origin Hotel including a Tattered Cover bookstore that is slated for completion in early 2020.
“With the continued growth of companies along the Denver-Boulder corridor, Downtown Westminster is located directly in the path of progress and is an ideal spot to develop Class A office product with the transit-oriented nature of the site and over 100,000 square feet of walkable amenities,” said Doug Zabel, managing investment principal at Schnitzer West.
“The amenity-rich environment plus Class A office product is the perfect formula to meet the needs of today’s growing corporate clients that value the quality of the employee experience, which ultimately leads to higher productivity rates.” “Adding an office user to Downtown Westminster takes it one step closer to a true, sustainable downtown by ensuring a consistent daytime population of employees,” said Westminster Mayor Herb Atchison. “The addition of office will also attract more amenities for workers, including retail, restaurants and service businesses.”
The office buildings will be developed on two sites close to Highway 36. The initial building is likely to get underway in 2021 and take about two years to complete, according to Hall. The second site could accommodate two subsequent buildings of about 225,000 sf each.
Downtown Westminster has the capacity for as much as 4 million sf of office space at build-out. “This is just the beginning in the downtown,” said Hall. “Now that we have key amenities like dining and entertainment in place or opening soon, it’s a major attraction for office,” he said.
“There is, generally speaking, a shortage of large, available office space in the U.S. 36 corridor, and Westminster has been quite successful recently in attracting the corporate headquarters of Ball Corp., which is now under construction, and Maxar Technologies, which was a national competition for which Westminster prevailed. So, we anticipate that trend of corporate users looking at the U.S. 36 corridor as a strong location because of the proximity of talented labor and its location between Denver and Boulder,” Hall commented.
Downtown Westminster is laid out on a 25-block grid and, in addition to a commuter rail station, includes a recently approved underpass connection to the adjacent 500-bus rapid-transit station.
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