Dissecting the Denver Market: Why is the Market So Hot?

Why is buying in Denver so hot right now? A brief summary of top tens and attention Denver is getting, then some statistics:

• Denver was #3 in the country for job growth in 2011
• Denver was #3 for relocating families in 2011
• House prices continue to go up in Denver-Metro
• High desirability (mountains, weather, life) AND high affordability(much cheaper than west competitors), which is a rare combination. 
• Interest rates are very low
• It's cheaper to buy then to rent right now

And one more thing: you gotta know your Months of Inventory. Months of Inventory are an excellent and accurate way to measure market action - whether it's a buyers or sellers market.  Months of inventory simply means the time it takes for all the houses on the market right now to be sold and gone at the current rate they are selling for.

For example, if there are 10 houses on the market in a particular neighborhood, and there were 10 sales in the last month in that neighborhood, the months of inventory would be 1 month - it would take about one month to sell all 10 of those homes at the current selling rate. And that would be a very hot market.

Here are the stats for months of inventory in the Denver-Metro area. As you can see, so much depends on PRICE RANGE:

Price               Months of Inventory           Price Change in the Last 12 Months        Market Type
$0-85k                        4                                                       +19%                                    Sellers - HOT!
$85-135k                    3.6                                                    +10%                                    Sellers - HOT!
$136-210k                  4.1                                                    +6%                                      Sellers - Great
$210-315k                  4.9                                                    +1%                                      Sellers - Good
$315-460k                  7                                                       -7%                                       Buyers - Slower      
$460+                         11                                                     -13%                                     Buyer - Slow

Conclusions: 

For Sellers: 

• It is a PERFECT time to sell anything below $210,000 - prices are going up in these ranges, demand is high, and supply is low. Buyers will usually compete against each other and pay higher prices. 
• It is still a good time to sell anything below $315,000, since supply is down and demand is high.
• You can still sell anything under $460,000, but it may take a bit longer.

For Buyers: 

• It is a PERFECT time to buy anything above $460,000 - supply is a-plenty! But demand is really low, and things aren't moving that fast. Sellers are very willing to accept low offers. 
• It is still a buyer's market between $315,000 and $460,000, and prices are a bit down. Sellers would be more willing to accept a lower offer. 
• It is tougher to buy anything below $210,000, since competition and demand are high, and supply is low.

Why Should I Sell Now?

Sellers are in the same boat as buyers right now. "Should I sell now? Should I wait? Should I downside?" 

To answer this question, let's check out objectively what is going on in the market from a seller's perspective:

1) The number of homes for sale are down 39% since last year, which means thoughdemand from buyers is UP, supply is DOWN. 

2) The absorption rate is at 4.4 months, which again means there is less inventory than demand. A balanced market is 6 months, anything below that means it is a seller's market.

3) With interest rates so low, many buyers are in the market right now, which means more competition, exposure and demand for your house. There are multiple offer wars ALL over the Denver-area right now. I know, I have been in 3 of them in the last 2 weeks!

4) Average "days on market" are also down 14% since last year, which means houses are selling faster. 

5) If you are selling in order to downsize (or upgrade), it is a perfect situation for you to buy (see all the "Reasons to Buy" above!).  

All these reasons are objective reasons from the market and what is actually going on in the field. Verdict is: It can't get much better to buy or sell right now!