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I recently took clients to see a $500K home in Centennial that sat on the market for much of the third quarter last year with little activity and no offers. Two weeks into the new year that home received four showings and multiple offers within a week and sold over the asking price. I called a listing agent on a $2M+ home in Denver that recently went pending to inquire about their activity because this home is in direct competition with a home my client is going to list. That home performed along this same pattern as the home in Centennial – it sat for almost 90 days during this same period and all of a sudden received multiple offers and sold over asking shortly after the holidays ended. Homes that have come on the market in the last several weeks throughout the metro area across the range of price points have also experienced strong showing activity and multiple offers that include deal sweeteners from buyers which push prices higher.
So what’s going on that these properties are now selling?
In October 2023, interest rates topped 8% for the first time in decades. Many buyers pulled back their searches, crossing their fingers interest rates would come down to a more “reasonable” level. At 8% those properties sitting on the market – many since October – were out of reach to buyers; once rates dropped to 6%-7%, those sitting homes became attainable again. This, coupled with continued low inventory, explains why homes that had been sitting for months ended up selling with multiple offers over asking price.
Inventory is now coming on the market at higher levels than we’ve seen since the pandemic, but the inventory numbers do not reflect that volume. Many of these newly listed homes are going pending either before hitting the market entirely or within just a few days, so they are not on the market long enough to be counted among the active inventory. As such, buyers find themselves competing – sometimes fiercely – for newly listed homes as well as homes that have been languishing for a while, and including escalation clauses, limited inspection requests, and appraisal gap coverage in their already over-asking offers.
If you are a buyer in this market, you will need to be prepared to compete, and in many cases that may mean offering over-asking to ensure your offer will even be a contender. You may also want to consider capping your search at a price point slightly lower than that in which you have been looking, to bid above asking yet remain in your target comfortable range.
If you are a seller in this market, and you have flexibility around when you sell your home, sell as soon as you can and don’t wait to list your home. The inventory is increasing quickly, which likely will mean more competition for you. The fewer homes in direct competition to yours when you list, the more leverage you will have in a negotiation with buyers.
The market is ever-changing, and our current market more than proves that point. It will be interesting to watch how the market plays out in the spring and summer months, and all eyes are on the Fed and potential interest rate cuts. Stay tuned!
