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January 3, 2023

2023 Denver Real Estate Market Update

Happy New Year!  Here at Focus Real Estate we like to take this time to step back, review the state of the real estate market and share what we see for 2023 with you, our past clients, neighbors, friends, and family. 

Our goal is not to overwhelm you with statistics, but instead to provide you with a few key take-aways in case you or someone you know is considering making a move in 2023.

As always, please let us know if we can be of service to you or someone you know!

What are the big trends in the local real estate market going into 2023?

Interest rate hikes have exerted downward pressure on the market.  It’s no secret that one of the biggest macroeconomic drivers for the US residential home buying and selling market is mortgage rates.  Mortgage rates are often tied to the rates set by the Federal Reserve (the “Fed”).  After seven (7) rapid rate increases in 2022, right now many expect the Fed to raise rates again on February 1, 2023.  The Fed is anticipated to meet eight (8) times in 2023 to discuss rates – so more rate increases could be coming. 

What does all this mean? 

Simply, if mortgage rates continue to go up, buyers’ borrowing costs – and their monthly mortgage payments – will increase.  Buyers will effectively be able to afford less home, and some if not many buyers will opt to pause on buying.  We’ve seen that very dynamic with our client base here at Focus.  In Spring 2022 we had several dozen buyers eager to purchase homes in Denver.  As rates increased through 2022, more and more of our buyers scaled back their buying plans, with some pausing completely while others became more conservative with what they could afford.

The short story?  Fewer buyers, and more financially conscientious buyers, means downward pressure on home prices in 2023.

Days on Market” (which is how long a home takes to sell) has increased meaning homes are not selling as quickly.  The Fed’s interest rate increases have had their desired effect so far.  According to the Denver Metro Association of Realtors (“DMAR”) December Market Trends Report, the “average days in the MLS increased 20 percent month-over-month to 36 days, which is exactly a 140 percent increase from this time last year.” 

Wow!  This syncs with what we’ve been seeing at Focus as well.  With fewer buyers and/or buyers managing their purchasing budgets down more, homes are sitting “active” on the MLS longer.  Homes that would’ve sold very quickly in early 2022 were all the sudden selling at a much more “normal” pace (historically-speaking) by late 2022.

Home prices are stabilizing across Denver.  According to DMAR, the average home price dropped 0.58% month-over-month from $736,675 to $732,437.  This sounds dramatic, and in a way it is, but the good news is this is also a 4.17% price increase from this time last year when the average price was $703,119.  So there’s some good, and some bad news on pricing. 

Anecdotally what we’ve seen here at Focus is that properties with excellent finishes, floorplans, or other attributes that are reasonably priced and well-marketed with great photographs and clever social marketing campaigns continue to be popular with our buyers.  Meanwhile, homes that might be more challenging (e.g., require lots of renovations, have inspection issues, subpar locations, etc.) tend to sit on the MLS longer and/or require one or more price drops before going under contract. 

Will more mortgage rates increases impact pricing in 2023?  We don’t know yet, but what we do know is that presenting your home as the best value in your particular price point is more important than it’s been in a long while.

Sellers want to explore all options – including both selling or renting.  We’ve been listening to our clients, and not all of our sellers are eager to sell their homes in this uncertain market.  We completely understand! That’s one of the primary reasons we recently started our own concierge-level property management company.  We want to give our clients all available options for their homes.  Whether you’d like to explore selling, or you’d like to explore renting, we can give you a detailed, sophisticated analysis for your particular property and let you decide what is best for you and your situation.

Real estate commissions appear to be trending down due to competition.  Consumers have an abundance of options when they choose how to sell their homes.  For several years now this has put downward pressure on the traditional commission model.  This is a good thing for you, the consumer, and at Focus we’re proactively leading the charge to provide the most value possible to our clients.  We provide a flexible commission structure that matches the flexibility our clients need.  For example, if you both buy and sell with Focus, we are happy to discuss discounting our commission.

Buyer “Take-Aways” from these Trends:

  • Buyers have more leverage than they’ve had in recent history.  We’re seeing more negotiating on price, and we’ve seen sellers much more willing to concede and negotiate on pricing.  While there are still bidding wars here and there for special homes, the days of every available home having multiple offers and selling within days of hitting the MLS are over for now.
  • New home builders are eager to sell their homes.  We’re seeing new home builders get more aggressive in their concessions, price drops, interest rate buydowns for buyers and overall willingness to negotiate.  The leverage that buyers have varies by builder and by home site, but savvy buyers can look for opportunities in the new build market.  We’re seeing buyers have the most leverage when purchasing a “spec” home, which is a home that is already built or under construction, but not yet sold to a buyer. 
  • Contract terms are moving to more buyer-favorable terms.  Not so long ago many offers our team here at Focus wrote might include an “escalation clause,” a limited inspection clause, an appraisal gap clause, non-refundable earnest money, and more.  These are typically seller-favorable clauses and were ways to help our clients’ offers stand out in multiple offer bidding war scenarios.  Now?  Offers don’t always include these seller-favorable terms, and more buyer-favorable terms like home sale contingencies are potentially on the table.  We’re also seeing buyers have more say over the timeline for closing and the possession date.
  • Buyers have more leverage with rate buydowns and mortgage providers.  Some sellers are offering rate buy-downs, and with a dramatic decline in the number of willing and available buyers, mortgage companies are eager to bring in buyers as well.  While rates are higher than they’ve been in recent history, if you’re a buyer who is willing to finance with today’s rates, you will have a lot of options when it comes to providers and potentially even having a seller buy your rate down.

Seller “Take-Aways” from these Trends:

  • It may be a great time to evaluate both selling or renting your home.  The local real estate market has changed a lot in a very short period of time, and more uncertainty looms with the prospect of more rate increases.  If you’re not comfortable selling, or at least would like to explore all options available to you, let us know and we’d be happy to give you an honest, detailed analysis for both selling or renting your home.
  • Home valuations are in flux.  We’re not sure if home prices will increase, decrease, or stay about the same in 2023.  Given the large amount of home value uncertainty, we’re providing our clients, friends and family with “Homebot”, which is a service that provides homeowners with a free monthly automated home value.  Automated valuations aren’t always 100% accurate, but we’ve found that our clients appreciate quick, regular “ballpark estimates” of their home value.  Then if they’re considering a move we dive in and create a custom home valuation to make sure the Homebot valuation is accurate. We’ll be in touch with more information to get you set up with “Homebot” soon. 
  • Presentation, presentation, presentation … is paramount.  One of our primary goals as real estate brokers is to present your home better than all of your competitors.  Competition is stiff at all price points, and if we can help you stage your home, take amazing professional photographs, and market your home in the top 10% of listings for your specific floorplan / neighborhood / price point we feel confident you’ll have a great chance of selling your home at a good price.  In short, sellers should take notice that marketing and presentation are extremely important in the current environment so things like 3D virtual models, Facebook/Instagram promotions, and more should be hot topics with your broker.

Other Exciting News:

  • Our new ebook – “Living Near Anschutz”!  One of our key initiatives at Focus is finding better ways to market to primary economic drivers for the neighborhoods we work in.  For example, many Central Park residents – and therefore many Central Park buyers, sellers, landlords, and renters, work on the nearby Anschutz Medical Campus.  So we asked ourselves one simple question, how can we best serve the people that work on this massive medical campus?  The answer was we created a new e-book titled Living Near Anschutz that helps these people solve their biggest 5 problems when trying to get settled into the area. Please check out the ebook and feel free to share it with anyone you know in the local medical community.
  • Our new property management company!  As we mentioned a few times above, we have added property management to our list of services we provide our clients in the Central Park neighborhood and surrounding areas.  We recognize selling isn’t the only path for homeowners and renting it out could very well be the best option for some people.  If you’re interested in learning more about Focus Real Estate Property Management please reach out and we’ll be happy to answer your questions.

Final Thoughts:

We hope you found some nuggets of useful information in this quick update on the market.  If you have any questions we’re here to help!

2022 was a roller coaster of a year, with all types of uncertainty.  Hopefully we can help buyers and sellers remain calm and make the best long term decisions when considering their real estate moves.  When it comes to your housing decisions we always come back to these two simple, time-tested pieces of advice:

  • First, you should be a homeowner for the long haul. Real estate, like the stock market, will have its ups and downs. Focus less on short term market fluctuations and more on what makes sense for you personally in the long run.
  • Second, you should own a home you can truly afford. That way, if life throws you a financial curve ball you hopefully won’t find yourself in a tight spot.

If you’re considering a real estate move in 2023 we’d love to chat and see if we can be of service.

If moving isn’t on your radar, but you know someone who may be moving, please feel free to pass this along to them.

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