Every month I show you the most recent Market Snapshot to give you an update on the state of the real estate market. Last month we walked through each metric in the single-family home report to give you a better understanding of what the numbers mean and how you should use them if you’re looking to buy or sell a home. This month, let’s take a closer look at the market for condos and townhomes to better understand how that segment is performing. The market for “attached” homes, just like the single-family market, has been on fire the past few years. Every metric I measure has shown enormous demand from buyers and a lack of inventory from sellers, continuing the trend toward competing offers and fast rising prices. The year-over-year price increase for attached properties is 8 percent. The myth is that condos and townhomes are not as good of an investment as a single-family home, or that their prices are less stable and fall faster when the market drops. When a client tells me this (and they all do) I pull up the data because the data shows this is not true.
One of the big differences in purchasing an attached property vs. a single family home lies in understanding the rules, regulations and financial health of the Home Owners’ Association (HOA). Understanding and qualifying the HOA should be taken very seriously because a bad HOA makes for a bad purchase. Fortunately there are well established metrics to guide us in evaluating an HOA. Takeaway: when I send over the HOA documents, READ them.
Condos and townhomes come with many advantages as well 1.) They can be more affordable than single-family homes and the low maintenance can be attractive to many buyers. 2.) Start in a condo or townhome and move up as life changes. If you can purchase your move-up property (even if it’s not your ‘forever’ home) without selling your townhome, you’ve got your first investment property. Over time, your renters will pay down/off your mortgage. How great is that?
If you’re looking to buy or sell a condo and townhome, it’s very important to understand what the market is telling you.
We see a further continuation of a low inventory environment with lots of unsatisfied demand.
The chart shows two different time periods, Prior Month and Year A go. Prior Month compares the most recent month to the month before (Nov. ’16 vs. Oct. ’16). Year Ago compares the
prior month to the same month one year ago (Nov.’16 vs. Nov.’15). There are definite seasonal differences in real estate so using month-to-month comparison trends can be somewhat misleading. For example, we expect fewer properties to come on the market during the fall and winter and more listings during the spring and summer. So a word of caution- don’t get too caught up in month-
to-month data. Review it, but the year-over-year data is more relevant, useful and instructive.We’ll focus on the year-over-year numbers below:
Active: This is the number of active properties on the MLS-up 3 percent in the past year from 1,298 to1,342. The meaning is clear: we have too few listings to satisfy the demand in the market, and the number of listings is not rising significantly. Since demand (people wanting to buy condos and townhomes) is outstripping supply (people selling condos and townhomes) our only conclusion can be that the strong seller’s market will remain until that trend changes. So far, we have gone through years of continually decreasing inventory with no sign of that changing.
New Listings: This is the number of new listings that were put on the MLS–up 6 percent in the past year, from 1,054 to 1,121. This metric is closely related to actives. Similar to actives, there are still way too few attached properties on the market. So, it’s the same conclusion as above. We have a lower inventory of properties on the market for buyers to choose from, causing higher demand with lower supply.
Under Contract: This is the number of properties under contract on the MLS at the moment the data were captured – up 1 percent, from 1,400 to 1,412. Even with the reduced inventory, people are still looking to buy condos and townhomes. This number reflects the demand of the market – buyers wanting to buy – even in a market with record low inventory to choose from. Sold: This is the number of condos and townhomes that were sold – up 2 percent in the past year from 1,139 to 1,160. While everyone talks about what a strong real estate market we have it is shocking that the number of homes sold is dropping, not climbing! Again, this is almost entirely a reflection of the limited inventory (few actives and new listings) for buyers to choose from. As much as folks want to buy homes, there are so few on the market the number of homes sold is falling. Our metro Denver population is increasing 50,000 per year and many of these folks want to buy homes but are not able to because of the limited supply. This is the reason we believe our seller’s market is going to stand strong for several more years – lots of buyers and not enough properties for them to buy. Until more inventory comes on the market, the demand will continue to surpass the supply. That’s the definition of a seller’s market.
Avg. CDOM: No change. This is the average Combined Days on Market for the properties sold, which remained unchanged. In a balanced market, 90 CDOM is about what we see. In our strong seller’s market this number is very low at 24. It’s just another indication of the strength of this market.Avg. Sold Price: Up 8 percent. Prices have been rising in metro Denver for the past seven years. It’s interesting to note that in the past 45 years the average price increase for attached homes has been 5.9 percent per year, just below the 8 percent from the past year. Given everything we have discussed above regarding the lack of inventory and demand for housing, we expect prices to continue to rise for a number of years.Median Sold Price: Up 13 percent. The median sold price is the midpoint number of all the homes sold on the market.
If you’d like to learn more about how you can best position yourself in this real estate market feel free to give me a call. I’d love to help you understand what your best options are to help you make a great decision!