Why Denver real estate agents are struggling to price homes as the market normalizes
It’s been some time since Jill Schafer, a broker associate with Kentwood Real Estate, saw so many price reductions in a week across metro Denver’s housing market.
Price reductions, she says, are pretty much running in line with every new listing.
“That indicates to me that agents are having a difficult time with pricing and are dealing with multiple reductions to try and hit the market,” said Schafer, who also chairs the Denver Metro Association of Realtors trends committee.
Denver’s housing market is normalizing, but it continues to be a bit of an enigma. In the past few months, inventory has shot up to near historic highs and houses are staying on the market longer — big indicators of a market shifting in favor of buyers — but at the same time, the average sale price of a single-family home hit record highs for two consecutive months.
As a result, less houses have been selling as inventory continues to skyrocket because more sellers want to sell at, what they feel, is the top of the market. It’s a metric to keep an eye on in the second half of the year and heading into the slower winter season, Schafer says.
Inventory across 11 counties in metro Denver in June, shot up 7% to 9,520 active listings. At the same time, the number of sold homes decreased 14.3% to 5,234. On average, single-family and condo residents, combined, are staying on the market for 23 days, which is up 21% from a year ago.
Still, there’s only about two months of inventory available right now in metro Denver.
June’s average sale price of single-family and condo properties dropped 0.54% to $499,807 — about a $56,000 reduction from last month’s record high. June’s median sale price came in at $428,000.
With nearly every new listing going through some kind of price reduction, agents are working harder to list with a competitive, but realistic, asking price. Part of the issue, Schafer says, are automated sites like Zillow giving potentially inaccurate values that clients are using as gospel.
Schafer said whenever she has a listing meeting with a client now, she collects about eight different appraisals from those companies, listing out the high and the low. One of her recent luxury listings above $1 million showed a $250,000 difference between the low and the high.
“We have to do a lot more research now with our comparisons because we know our clients are looking at those automated sites,” she said.
Last month, Zillow launched a new “Zestimate” algorithm that the company claims brings the median nationwide error rate of a home’s value to less than 2%. The technology uses artificial intelligence to identify things like granite countertops.
“It’s a big leap forward, because it means the Zestimate can now understand not just a home’s facts and figures, but its quality and curb appeal,” said Stan Humphries, Zillow’s chief analytics officer and the creator of Zestimate.
To keep up, real estate agents need to pay closer attention to the competition. Every photo on a good listing looks pretty, Schafer said, but finishes may not be as high quality as they appear, which could eventually warrant a price adjustment.
Denver is also very much a “micro-neighborhood” market, Schafer said, meaning similar houses can have significant price differences depending on location. In some neighborhoods, agents may have to go back nine months to find enough comps, which also typically leads to price adjustments.
Other housing market facts and figures:
In June 2018, sellers in Denver County on average were getting 0.6% more than asking. That’s not the case this year, which most listing prices being reduced by 0.3%, according to the Colorado Association of Realtors monthly report.
The sales of $1 million-plus homes are down 2.7% year over year, but up 34% compared to 2017 deals.
Speaking of those luxury homes, they’re seeing some of the biggest price reductions. Sales price to list price is at 97.62% for single-family homes above $1 million. At the same time, there’s been a 4.56% increase in price per square foot at $298.
Year to date, 13,866 properties have sold across metro Denver. That’s down from the same time period a year ago when 13,951 properties sold.