The Real Estate Paradox: Days on Market are Up, While Inventory is Down
Metro Denver’s residential real estate data for November is a bit all over the place. Active inventory has decreased by 6% since last year, yet homes are spending 15% more time on the market (equalling an extra 5 days on average). In fact, according to real estate agent Shelley Conger, "inventory set a new record low" despite the sizable increase in days on market. These two numbers seem at odds with each other… there’s less inventory (tipping the market scales even farther in favor of sellers), yet homes for sale are spending significantly longer on the market than this time last year! And, to make things even more confusing October saw 10% more Denver homes under contract than October of last year. Again, the situation seems paradoxical alongside the inventory and days on market statistics. How can all these things be true at once?
Single Family Homes: No Paradox At All
Keep in mind that residential real estate trends combine data from both single-family homes and attached homes (condos, townhomes, and row homes). A closer look at condo real estate trends vs. single family homes trends may just hold the answer to this market report paradox. The single family home market performed as expected, with little change to days on market (less than a day's increase), 10% lower inventory than last year, and a healthy increase in average sold price (12%). So, where is the marked increase in days on market for overall residential properties coming from?
Those Fancy Billboards Could be to Blame
One explanation could be some recent changes in the condominium market. Have you noticed the gigantic billboards selling gorgeous, luxury condos? New-build luxury condos have been somewhat of a trend over the past few months, all but flooding the market with expensive attached homes. Just like single family luxury homes, luxury condos spend substantially longer on the market than what would be considered affordable attached housing. In fact, attached homes spent 37% longer on the market this October than October of 2016. This comes out to 11 days on market, which is quite substantial in the swift sellers market to which we’ve become accustomed. This change is very likely due to the swell in luxury condo new builds.
The Paradox Solution
So, just like a true paradox, the data seems to conflict, but actually makes complete sense. Nothing strange is happening in the market. Home values continue to rise and Colorado is still facing an inventory shortage. The only difference is that the Denver real estate community is learning the lesson that - despite the popularity of affordable attached homes - luxury condos are hard to sell. This data is reflected in November’s market report, but with little impact on our healthy market.