We’re at the start of the new year, and many people are curious about how the Denver real estate market will play out in 2023. Let’s take a look at Metrolist statistics related to Inventory, Closed Price/List Price Ratios and Days on Market to evaluate the current market.
We ended December 2022 with 4757 properties active on the market. Compare that to December 2021 when there were just 1477 available properties – this amounts to a 222% increase in inventory year-over-year. Part of this increase in inventory is due to the number of properties staying on the market longer, not necessarily more sellers entering the market.
Closed Price to List Price Ratios
At the end of December 2022, sellers saw an average closed price/list price ratio of 98.4%. This number represents a decrease of 3.1% from December 2021 when the average CP/LP ratio was 101.5%. The difference in these two statistics, although not tremendous, depicts the reemergence of less-than-asking price offers coinciding with rising interest rates. This trend is further accentuated by price reductions, a phenomenon that, until recently, had been absent from the market for quite some time; according to the statistics, 52.8% of active listings reduced their asking prices in December 2022 prior to going pending with a contract.
Days on Market
Average Days in MLS (DIM) at the end of December 2022 was 43; compare that number to 18 DIM at the end of December 2021, which is an increase of 138.9% year-over-year. The contrast between these two metrics illustrates the fact that properties are not moving as quickly as they were a year ago and supports the trend that buyers now have more time to think about properties before submitting offers.
Inventory was down 7.19% from 167 in December 2021 to 155 in December 2022. The average CP/LP ratio decreased 2.99% from 100.62% in December 2021 to 97.61% in December 2022. DIM on average increased 13.2% from 38 in December 2021 to 43 in December 2022. While luxury market buyers may have fewer homes from which to choose, they have more time and flexibility to make those choices, yet sellers still command high prices when they sell.
Overall, what do these statistics portray and what are the implications for buyers and sellers now? According to the numbers, even with the slowing we’ve seen in recent months, the market is still strong; inventory has increased and will continue to do so as we move into the spring, properties are still selling yet not quite so quickly, and sellers still command solid closed-to-list prices when they sell. Interest rates – which are typically forefront in the minds of buyers but not usually as big of a concern in recent years for sellers – have caused sellers to seriously consider whether to sell because doing so may necessitate relinquishing their often-lower interest rate in favor of one significantly higher, which in some cases, could be more than double.
If you’re a seller in this market, it’s imperative that you understand that the market has changed and it’s no longer the crazy sellers’ market from a year ago. You must be realistic with your pricing strategy and price your property at market value – or even slightly under – to ensure you generate interest from the buyer pool. It seems counter-intuitive, this pricing below market value thing, but buyers are out there and they know value when they see it; even in this slower, less competitive market, buyers will compete when they feel the price justifies the value, and they will pass when they feel the property is even slightly over-priced. Conversely, if you’re a buyer in this market you must know your limits – exactly how far you’re willing to go emotionally and financially if you end up in a competing offer situation – and be willing to walk away if necessary. While multiple-offer situations are not currently as prevalent as they were in the spring of last year, in a competitive offer situation you have little to no leverage as a buyer and you must negotiate with your limits in mind; stretching those limits too far can have disastrous consequences both emotionally and financially.
With the rumblings of “are we headed into a recession” occurring in conversations, it will be interesting to watch how the market plays out in 2023. Stay tuned!
Renee Cohen is a Colorado Realtor with a passion for helping her clients navigate the emotional process of buying and selling real estate. She loves educating her clients about the market, advocating on their behalf, and helping them make informed decisions. Reputable. Remarkable. Real Estate. Contact Renee to assist you with your real estate needs!