Denver hasn't been a real-estate bargain for years. But anyone who assumed that consistently high prices in the metro area would immediately plunge during the COVID-19 outbreak was wrong.
Although some listings have been lowered here and there, "I'm not seeing any dramatic move in prices," says Victoria Macaskill, an independent broker and co-owner with husband Mike Unruh of Denver Homes, as well as a keen observer of the local market (see her spot-on 2019 commentary in "What's Not Getting Reported About Denver Real Estate"). "But what I am seeing, and what I had not seen before, is that sellers are more inclined to negotiate."
This isn't the only change that's taken place since last month, when Denver and Colorado as a whole instituted stay-at-home orders.
"March was a tale of two markets," Macaskill maintains. "Once the stay-at-home orders were issued, there was a sort of retraction. We saw over 700 homes withdrawn from the market."
Moreover, showings were down 45 percent before an April 9 edict from Colorado's Division of Real Estate that put a temporary end to such walk-throughs, unless it was related to an actual closing. "Real estate appraisals and closings are considered critical services to complete real estate transactions," the announcement noted. "Further, home inspections and final walkthroughs after a buyer has signed a purchase contract and is therefore a condition precedent to the actual transfer of property, is also considered to be an essential part of the real estate transaction. Elements that are fundamental to the real estate transaction are deemed essential to support market activity. However, showing a property or conducting an open house in-person during the COVID-19 pandemic shall be avoided as it violates the specific mandates of recently issued executive and public health orders."
Against this backdrop, potential buyers have grown more cautious. According to Macaskill, "Their biggest driver is job security. Definitely some of them are concerned about their health, but they're more concerned about whether they'll have a job in two or three months." Moreover, with creditors tightening requirements, fewer people are able to qualify for loans, "so they're sitting on the sidelines. And that's pushed activity down."
At the same time, she continues, "people aren't wanting to sell if they don't have to. They don't want strangers coming through their home and potentially infecting them. So unless buyers are 100 percent sure about their job, they're waiting it out, and sellers are doing the same thing."
While the potential impacts are unknown, Macaskill notes that "if the economy doesn't rebound, and if there's still so much fear about it, I don't see how it won't have an effect on housing long-term. We could see buyers nervous to jump in, and right now, it's definitely weird out there. We're all trying to grasp what the new normal will look like."
Nonetheless, she adds, "people who are selling are positioned well, because inventory is lower than is typical for this time of year."
The reasons for the dip in supply are complicated. "Almost 500 buyers terminated their contracts at the end of March," she notes. "They just pulled out, so those homes are back on the market. But we've also seen a lot of sellers retract, and because both of those things happened at the same time, inventory is still very low. With so many people going, 'Let's wait this out,' sellers who are going to market have an advantage, and houses are still moving."
She references a couple who closed on a house in recent weeks: "One works in health care and one is a teacher, so they feel like they have job security." At the same time, though, "I've had other buyers who are self-employed, and they're not as secure about moving forward."
As for sellers, "They're not seeing the multiple offers" that were so common in Denver prior to COVID-19's rise. "In early March, I listed a home in Arvada that got seven offers. But if I was listing that home today, I don't think I'd see multiple bids. So sellers are realizing, 'This may be my only buyer. I may need to come to the table and negotiate.'"
One example: "I had a buyer who offered $20,000 under list, and the seller didn't even come back and counter us. Had it been two weeks earlier, there's no doubt we would have seen a counter from that seller. So it's shifting into a market where sellers are saying, 'I have to negotiate.'"
If this trend continues, prices could actually tumble. "Sellers may need to be a little more realistic," Macaskill says. "And even if lists don't come down a lot right away, the rate of growth probably won't be as big."
If the bottom falls out of the Denver market, will the city be flooded with speculators eager to snap up properties and sit on them until times get better? "I'm not seeing that in a big way yet," she replies. "But conversations I've had with investors is, 'Hold on to that cash, because cash is going to go a long way in the future.' Because real estate is not as reactionary as the stock market or the employment market, it could be six to twelve months before we see the best opportunities, especially since the government has provided stopgaps and forbearance programs to help people avoid foreclosures. So I don't think the sharks are circling yet. They're waiting to see what's going to happen."
The homes likely to be available first may be "short-term rentals," she predicts. "People may not be confident to travel over the summer until there's a vaccine. If there are a lot of vacancies, it could force owners of short-term rental properties to sell, and that could mean a greater influx of inventory in the fall."
Sellers, meanwhile, "don't need to be scared of the market right now," Macaskill concludes. "They just have to be strategic — and have an exceptional online presence, so people can take virtual tours."
Because social distancing is a thing in Denver real estate, too.
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