The Denver MLS trends data for August 2020 is out. Comparing year over year (August 2019 to August 2020) is better than comparing the previous month, because we have defined seasonality trends.
Denver MLS Market Stats
- Down 41% vs last year
- Down 15% vs last month
- Most scarcity at lower end; no change
- Up +4% vs last year
- Down -19% vs last month
- Good strength, but the over-performance vs. last year is slowing down, as you would expect (seasonality)
- +12% vs last year
- +1% vs last month
- As we have discussed, this is a MIX issue -not selling small homes is driving up the average price. We likely will see this reverse around March ’21. Be ready to explain it.
- Home prices +14%, condos +2%. Maybe the downtown condo slowdown is dragging this index down?
Days On Market
- Down. NO surprise! Properties are seling about a week faster than last year. 23 days vs 31.
- Most important leading indicator. +8% vs July ’20 and +33% from Aug ’19.
- Closing traffic in Sept will be very strong.
According to the National Association of REALTORS, Colorado has two of the top 10 “work from home” counties in the US. Douglas County placed second and Broomfield county placed eighth. Georgia’s Forsyth County, Northeast of Atlanta, took the top spot.
Denver has the fifth-best real estate market out of the cities with more than 300,000 people. Seattle scored the highest, followed by Nashville and Austin. Colorado Springs came in at number four. Nationally, foreclosures and short sales represented less than 1% of total sales, falling from 3% in June.
Although the real estate market is strong, according to a Bankrate.com survey, 22 million adults put off purchasing a home as a direct result of the pandemic. Of those 22 million, 62% have to leave their purchase by six months or more while 20% have delayed purchasing indefinitely.
According to the Bowtie Economist, Elliot Eisenberg, homebuilder sentiment is at its highest level since 1998 and new home starts are up 23.4% year-over-year. All important single family starts are up 7.4% year-over-year and overall starts are up 4.7% year to date. At the current rate of 1.496 million, starts are nearing their best level in 14 years. Topping it off, existing sales are at their best level since 2006 and are down just 5% year to date.
If you were looking for a deal, you were out of luck! On average, buyers paid more than full asking price for detached homes and nearly full price for attached homes. There was not a lot of room for negotiations when multiple buyers were competing for the same home.
Source: The above executive summary is from Lon Welsh of Your Castle Real Estate.
Denver Housing Trends August 2020
No Foreclosures on Horizon
Here’s a super simple chart from the Wall Street Journal that shows only 3% of US homes are underwater. 97% have equity. This is why we won’t see any material increase in foreclosure activity from the COVID crisis. Everyone who loses a job or has economic trouble will just list the normal way, sell, and harvest their equity.
This slide indicates there will be very few foreclosures.
How Will the Presidential Election Impact Real Estate?
In non-presidential years, there is a 9.8% decrease in November compared to October. This is the normal seasonality of the market with a slowdown in activity that’s usually seen in fall and winter. However, in presidential election years, the typical drop increases to 15%. Here’s why:
The year 2020 will be remembered as one of the most challenging times of our lives. A worldwide pandemic, a recession causing historic unemployment, and a level of social unrest perhaps never seen before have all changed the way we live. Only the real estate market seems to be unaffected as a new forecast projects there may be more homes purchased this year than last year.
As we come to the end of this tumultuous year, we’re preparing for perhaps the most contentious presidential election of the century. Today, it’s important to look at the impact past presidential election years have had on the real estate market.
Is there a drop-off in home sales during a presidential election year?
BTIG, a research and analysis company, looked at new home sales from 1963 through 2019 in their report titled One House, Two House, Red House, Blue House. They noted that in non-presidential years, there is a 9.8% decrease in November compared to October. This is the normal seasonality of the market, with a slowdown in activity that’s usually seen in fall and winter.
However, it also revealed that in presidential election years, the typical drop increases to 15%. The report explains why:
“This may indicate that potential homebuyers may become more cautious in the face of national election uncertainty.”
Are those sales lost forever?
No. BTIG determined:
“This caution is temporary, and ultimately results in deferred sales, as the economy, jobs, interest rates and consumer confidence all have far more meaningful roles in the home purchase decision than a Presidential election result in the months that follow.”
In a separate study done by Meyers Research & Zonda, Ali Wolf, Chief Economist, agrees that those purchases are just delayed until after the election:
“History suggests that the slowdown is largely concentrated in the month of November. In fact, the year after a presidential election is the best of the four-year cycle. This suggests that demand for new housing is not lost because of election uncertainty, rather it gets pushed out to the following year.”
Will it matter who is elected?
To some degree, but not in the overall number of home sales. As mentioned above, consumer confidence plays a significant role in a family’s desire to buy a home. How may consumer confidence impact the housing market post-election? The BTIG report covered that as well:
“A change in administration might benefit trailing blue county housing dynamics. The re-election of President Trump could continue to propel red county outperformance.”
Again, overall sales should not be impacted in a significant way.
If mortgage rates remain near all-time lows, the economy continues to recover, and unemployment continues to decrease, the real estate market should remain strong up to and past the election.
Source: Lon Welsh of Your Castle Real Estate.