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#107: Denver Real Estate Market Update - August 2019

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You're listening to the Denver Real Estate Estate. Investing podcast where it's all about helping you grow your Denver real estate portfolio. Here's your host Brisk Lopez. Everyone Chris Lopez here and welcome to her August Roundup podcast and actually. I need to change that because I decided last month. I had this in the middle of recording. The last podcast in July. Actually start changing the way that we produce these podcasts. As most of the no the episodes are usually about an hour long and we spend the first fifteen twenty five minutes talking about the monthly market. UPDATES don't move onto two or three case studies of recent deals that we we have done So for some reason they had this idea to actually start separating those things out actually like that from a content production standpoint actually think that makes it better for you the end user a user the end listener to go out there and pick and choose what you want to listen to or go back and reference so From here are now. We're actually separating these segments into in two different episodes so be the same thought where we do a monthly roundup but it'll be crossed two to four episodes so the very first one is the monthly fleet market update for the month of August and as usual. I've got Joe Massey here with me from Castle and Cooke Joe. How're you fantastic Chris? Greatest Sia really excited about this Monthly uh up data think the new format is going to be awesome. You know kind of breaking it down in the smaller bite sized chunks for people I think is GonNa be fun. Yeah so that we can hopefully just give you as a quicker more on point updates. So so we're looking at the data snapshot here For the basically the MLS in Denver Metro going looking at August. So we're GONNA hit some highlighted alighted numbers here and actually before I go into the details of it. The general trend that we've been seeing or inventory has been building that is still the same general trend that where so you're seeing we are still a seller's market. Not much has changed. Since the past few months of an Aslo transition from a crazy seller's market more of a normal seller's market type thing so looking here at the active number of properties and again we always like to compare August nineteen to August twenty eighteen. And you have some more more apples to apples comparison so August twenty thousand nine hundred eighty nine thousand three hundred fifty properties on the market at the end of the month and Aereo at eight thousand isn't two hundred twenty eight so about eleven hundred more properties or about a thirteen percent increase Joe Wright flag to you or do care no well. I don't see that as a red flag a year ago eighty two hundred properties. Now we're at ninety three hundred properties. We're GONNA I think we have a slide for this. This is still super-low guys. This is not a bubble. This is not an indication of a reason to freak out. No I think this is just normal that the market is loosening a little bit still a very strong sellers market not an absolutely bananas. Seller's market market. Just very strong and to break that breakdown. Those total acted inventory In that category homes are up about nine percent percent year over year but conned about twenty eight percent total and forty three percent or about eighteen hundred the condos things are in the five hundred thousand dollars plus range. So there's really higher and properties and are you doing many loans on six hundred thousand dollar Konno's for first time homebuyers Joe you. I'm not you know I know. There's a handful of those out there. But no I really see that condos are two hundred two seventy five for first time homebuyers buyers anything higher than that really is luxury and that's not that's not luxury if it's higher than that but those five six seven hundred thousand dollar condos that's luxury. I don't see that I awesome homebuyer. Yeah and I mean. We don't buy those as investors. No I mean everyone swallow here of an investor not through me but someone else they buy one of these like seventy thousand dollar condos and I can't get anyone to explain to me why that happens so but like there's always that one person out there but generally speaking like and we share that because you know we're interested in more that affordable range range of properties as investors also and. That's why I I'm home buyers warrants. Well so still tight inventory in that range so new listings are up about one point five percent from year years no big deal but under contracts. We saw a big jump here. We are about close to fifty nine hundred under contract trek properties in August twenty nineteen and ended about five thousand properties and our contract in August two thousand eighteen so almost a seventeen percent increase which I mean. That's no surprise to me because we've had some higher inventory builds that means hey buyers can pick out more by think. The driver from my perspective perspective is just I mean the interest rates were Scott stupid low the last couple of months here. Yeah it's been really really low it's been great For folks wanting to refinance but interestingly enough it has not move a lot of people off of the fence In buying you know we're still seeing the buying. Traffic is about the same. I think we're going to show that slide You know it has not moved a bunch. But you'd say Oh my God I have to buy now. Although homes are on sale I think we cover that. In last month's Webinar Are On sale right now in Denver once you combine You know a little bit looser inventory along with lower interest rates so I know from some investor clients. I've definitely had more people interested in buying just because interest rates have dropped but yeah that's that's the world I plan. I don't work with you know traditional retail buyers and you do a lot more a lot more transaction. I do plus in the retail side. You're not seeing a big uptick on the retail side You know retail buyers with low interest rates. No not not an abnormal amount. No interesting okay I would have thought otherwise. Grail the exact right down my everybody's off the fence but no it's been what we're seeing is now buyers are like. Oh my God I have a little bit of breathing room. I'm not going to buy right the way I want to think about this property for two or three days and I want to see if the couch is gonNA fit and suddenly the pendulum moves just a small amount and the become a little bit more picky. It's been very interesting. Look so our days market no surprise. Here they've crept up a little bit because we have more inventory Therefore on average takes longer for properties to sell so oh the days on market for Looking at from the average wise is at thirty up from twenty three and the median. We went from eleven to fourteen so right around roundabout almost a thirty percent increase on both so no surprise there But the total number of sole property in August is actually down from This August over last talks about fifty two hundred two fifty six hundred compared to August twenty eighteen which I would guess we see a higher number in there due to the lower interest rates but sounds like my crystal ball got wrong. Yeah no it's been pretty study and so another thing look at. Is these sold price. We are seeing them. Can the prices continue to increase. So I've had a lot of people calling me while I see a lot more price drops on the MOS or on Zillow or on Redfin and does that mean prices are dropping that atop the market and no it does not so The average soul price and August twenty nineteen nineteen was four hundred and eight hundred eight thousand up from four. Seventy two media's at four twenty five compared to four zero eight upwards about forty four percent for both of those and so what you're seeing those price drops for two reasons one is because you know seasonality. Were definitely not in the hot time anymore which is the springtime but a lot of people. I'm not just to their prices plus with growing inventory now as Joe said buyers can hallel more breathing room and take a little more time to go out there and pick the property they want so Sellers and or listing agents if they are overpricing their property. They're getting hit hard with very little traffic real little offers which then leads to a the price drop in two weeks or four weeks or six weeks or whatever but overall prices are still going up and you know I bought a place and I think joe you just goes on place all right. Did you just purchased the property yesterday. Yeah so we like to share that because we're sharing the data and we're saying hey it's still a good time to buy are both put our money where our mouth is actively looking for properties all the time. If there's others out there let us know we want to know about him. Yes please do So looking at the next slide. Here I this is slide and a lot of guys can't see it. But this is a slide that shows the month end of active listings to the month end. Sold home so always shows rose over the last twelve years. The average number of home sold for each month and get a really neat trend seeing it so of course going back ten twelve years ago or twelve years go into two thousand eight tons of inventory like twenty five thousand plus range but still between three to five thousand properties purchased throughout the year. And you fast forward. The last couple of years we've been bouncing around of about thirty five hundred to like seventy five hundred range inactive and Tori and until him or property sold or between like thirty five hundred in about six thousand so even though inventories come down a lot The number of transactions has crept up a little bit but nothing as much nothing not a big amount considering how much inventory has come down so we just said we're about ninety three hundred hundred total inventory for this past month in August. The average inventory for August over the last number of years is sixteen thousand seven eight hundred sixty one. So we're about seven thousand properties lower than the average and the record low was seventy three hundred properties in August. Twenty Sixteen ecksteen. The record high was almost thirty. Two Thousand Properties in August. Two thousand six so doing simple math is ninety. Three hundred closer to the rucker. Low Seventy three hundred or to the record high of thirty one thousand six hundred sixty four hundred still much closer to the record low. It's not a record low right now but still very close so you know still a strong sellers market as I mentioned earlier. Not just absolutely bananas crazy but still very strong. So if you've got properties nobody's to sell still a good time to do it but here's the interesting thing. It's one of my favorite things about this market. Still a good time to buy properties are still going up in value. Interest rates are low. Oh we're still getting good. Cash flows good cap rates. Good rely on a lot of different properties. So it's an interesting time nobody's winning. It's not the buyers are losing. The sellers are winning the buyers. Winning the sellers are losing. It's good for everyone right now and I think it was last month the month before we went over some Apartment data and rents are up to a million. We're seeing everything continue to increase and as you said. Earlier as interest rates have dropped from financing perspectives actually made properties more affordable since most of us pay a monthly mortgage payment. And we don't buy things cash all right so moving onto a another side this is just graphing The months of inventory available for all all the properties around Denver and graphing them over the seller's market a balanced market and a buyer's market. And so it's just a different way. Ada visually look at what type of market were in and so generally speaking. If we have four months or less of inventory it is considered a seller's market market roughly between about four and six months worth of inventory were an imbalance market where buyers and sellers. We're about an equal footing and then for above six months were a buyer's market so you know we just said I think we're at a about a one point zero on the total months for everything but I do know for this price ban when I really WanNa talk about for homes. No three hundred to five hundred thousand dollar price. Range is a one point five months of inventory. And that's the tach home so not counting condos towns but the tach properties in that three to five hundred thousand dollars price range. Would I one point five month inventory. And those are the properties that first time homeowners and live investors going after it's because that's the affordable properties and. We're at a one point five months now as yup and prices. We're definitely seeing more months of inventory but for us as investors these are the price range. We're looking at sort of one point five months inventory and when you get the four months. That's new starting. Getting into balanced balanced market territory. See The market is shifting. Some we have along way to shift before we're on a fully balanced market or even anywhere close to a buyer's market. Yeah it's still very strong sellers But buyers are getting a little bit of breathing room and frankly sellers panicking just a little bit right because because Oh my God we were winning for so long. Now they'll give up a little bit and concessions they'll give up a little bit and lower prices. You get to thirty days. It's been on the market and they'll panic a little bit. They shouldn't be but they they do. You get a little bit of psychology and buyers can can win every now and then exactly and just two guys know like I mean both sides can still do very well We just I just had a property listed about two weeks ago we put on the market Thursday. It was Think listed right around three eighty or three seventy five and we had all the right stuff to market that we priced it. Well we don't have the prep-work make it very presentable to buyers and galadriel stuff figured out beforehand. I went live on Thursday open house Saturday. I had a offer about five ran above ask price by sometime during the middle. Open the Middle House winner contract. I think it was either on Sunday or Monday. Then so for herself out there. People selling your property great. You still have that former price range and you price things. Well you will still get an offer very very quick Zora. Tell him that just to since most of us do the biocides site for investing Going after those properties that just hit the market. That's US refining the greatest wiggle room from sellers out there in terms of like a potential price production or use your seeing that seller concession or inspection objection concession a once in a contract those properties are oftentimes overpriced. Were there on the market for a couple of weeks and then as Joe said the seller stockins gets a little stressed out. Yeah yeah and I mean sellers think of my property and have it sold in fifteen minutes and WANNA be turns turns into two weeks three weeks a month. They start to panic. And that's normal right. Normally it takes ninety days to sell her home. We just forget right. We've forgotten ten ten years ago. We've forgotten twenty years ago. The human nature is to return to remember what happened last month. Yep exactly we'll have short term memory. Yeah so another another fact I wanted to throw in here. was that despite the slowing market for closure this year actually down eighteen percent from last year. which shocks me a little bit? Because you know if you look at last year's Colorado's always in the lowest bracket sometimes the lowest bracket or or the lowest state with the lowest amount of foreclosures so consistently Colorado has one of the lowest foreclosure rates across nationwide. And we're still seeing that trend. foreclosure down eighteen percent. So I shoulda. Yeah because I think that's a good barometer to see. Hey what's on the market. If a lot of people are starting to go into foreclosure to me that's an indicator we're not seeing that right now no not at all. I mean I I was in the market. You know a decade plus ago job I imagine the foreclosures were very different animal than they are today. Jesse were. They were out there. There was a lot of them absolutely. Absolutely yeah yeah so waiting around to find that amazing deal at putting you know twenty cents below twenty blow offer price not the best Roger. I now it's still hunting hunting properties finalist properties and getting some wiggle room on price or concessions as you go out there and buy properties I mean we do it all the time for a house. Hackers and our and on our buying hold investors and Joe does it a lot sees a lot on the contracts to see finances those things so this is these showing trends. We're going to talk about now now. Which is internal data from your castle? This is not pulled from the MLS. But this is just internal data that your castle tracks with all of their brokers and all their agents agents out here so what they look at us great for all the listings at their brokers. Have they then take that data compared to the centralize showing service or CSS which is Z.. Most popular at the most popular service out there for scheduling times for sellers and buyers coordinate times out there so I take all the data and and it gives us a really interesting ideas. Hey what's foot traffic listings are seeing and since your castle is one of the big brewers here in Denver with five hundred plus agents agents. It's a good indicator for what we're seeing or getting cater for what goes on the market overall so looking at twenty nineteen showing traffic Nothing really unusual. It's been a little bit lower the last couple of years which is to be expected because we have about the same number of buyers out there but now they have. Have you know twenty thirty sometimes. Forty percent more houses to look at so they're still looking at the same. Never houses reviving same foot traffic over a larger larger number of houses so looking at the August showing data We are right around thirteen. Or Fourteen showings per listing. Which is just a couple showings less than what we've seen in the past which is like a fourteen fifteen and seventeen over the last couple of years so kind of nothing significant here is kind of what we expected? Yup absolutely this is right on track. I mean you can see that black line there and some of you can't see it but the black line. That's that's charting the showing showing doing traffic pretty flat this year. No major spikes. Obviously it was a little up seasonally in the spring but been pretty flat the last couple months. And that's just fine. You Know Thirteen Fourteen showings ellings. A month is just fine all right. So now we're pulling out of our random factoid for the month this is just different than that we see or things we wanNA talk about. And so this is one that jumped out to me. Those looking over some data that your castle publishes and this is actually showing the percentage of homes that fall. Ah Contract has actually stayed about the same so looking back to twenty fourteen Two Thousand Fifteen twenty sixteen run around nineteen to twenty percent percent of all the property and contract fell out so for every five properties on. MLS contract about one was falling out. Now I was looking at us because hey great now since them better inventory and buyers could be slightly pick your is that changing how many properties fall out of contract and then going from from two thousand seventeen two thousand eighteen at sixteen and seventeen percent and so far in two thousand nine hundred sixteen percent of properties falling on a contract so The same the last couple of years slightly less than a couple years before that so little bit more a little bit less than five properties fall out a contract So as I I started looking at this. I'm actually not surprised because I started thinking you know walking through the process mentally and what you said earlier Joe I think buyers have a little bit more time now to think about the property for us but an offer ends. Hey great to see the property unit porn offering before you walk out the door and we lock up the key in the lock box type thing cool they can think about it so therefore they can and think about it They're probably can not selecting properties when they really don't want them the first place they don't use much buyer's remorse. Yeah and it's common the contract out here so buyer friendly like a lot of buyers agents that gray for interest rates to ever. Let's put an offer and in a contract and then during your due diligence process if he if it's not the right fit we can cancel and get it out and so a lot of people are more a trigger happy to get the contract because this Oh buyer friendly so we're seeing that number stay about about the same you know slightly down from last year but nothing significant and then gone on the same note. This was interesting to me so looking at the amount don't of Or the type of buyer out there whether they're buying with cash or buying with financing. It really doesn't make a huge difference in in terms of like the property falling out of contract or not versus if the person's buying with financing or cash and there's actually a slightly greater chance of a cash cash buyer falling in our contract than loan. So if you're looking at the financing deals about sixteen percent fellow contract and about twenty one percent contract for cash. Does that surprise. You Joe Not really You know I see some cash buyers. Everyone likes to think. Oh cash is king. If if it's a cash deal feel. They're always going to close on. Necessarily you know what sometimes they get under contract and may not actually be cash might be hard. Money might be hand. Borrowing Money for my grandmother might be something what else. I don't see that they close. I mean obviously the numbers show that don't close at better rate than mortgages and I think sometimes a cash buyer feels like you know I'm I'm holding all the cards because it's a cash cash transaction. You know what they're not going to negotiate with me on inspection will forget it. I'll just go find another property so I feel like sometimes cash buyers I can get a little full of themselves whereas you know somebody buying with alone. oftentimes they're just excited to buy a house. Yep and the psychology is a little different. Yeah I mean that. Make accents to me and you know as just a cash isn't guaranteed or more likely close. They can close faster than a lot of finance options because cash can close days. Sometimes a week outcomes but usually a lot quicker but I mean Joan. I've done deals together or worrying. Financing will be closed nine days from Goner contract contract to sing at the closing table. And so you. A lot of people can still close quickly with financing. So if you're out there putting offers if you're out there stung property Cash hasn't vantage is that the property is more likely to close a finance offer and gone that like I said earlier time to cash investors on all the cash investors but probably a a good percentage of them are investors out there. So they're probably more savvy or they might be putting in multiple offers to find the right property can get with and they'll cancer the properties. Because is great. I found a better deal from here. I put into offers both on a contract Great I'm this one's better cancel the first one buying this like so. That might be going on here. That's me totally speculating. On what the maybe going on our guys. Well that's it for the data. We have the slides. I wanted to go over. A Joe wasn't any data or final thoughts. You want to go before we wrap this up. No I think I hit it earlier. It's a great time the market guys. You've heard me say this before. It's a really great market because it's a good time for buyers good time for sellers so make sure your finance thing about what your goals are with financing what your goal with how many properties you want to own. What's your goal with how much money I WANNA put down and get out there and look at properties absolutely and guys I mean this new format break in The monthly round up from you know one long episode with three main parts until like three smaller Separate episodes. Hopefully you'll have make things easier for listening and also go back and Cherry pick the ones that's most relevant to you realize everyone may not wanna hear the monthly market update date Every single month but there might be specific feeling. Go check on So the next episodes after this one because they'll be a couple of deals that Joan I cover for the month breath of August all right. Well Joe Thank you listeners. Out there thank you. Thanks Chris. uh-huh

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