In the 1993 movie Groundhog Day, Bill Murray’s character, weatherman Phil Connors, is destined to relive the same day over and over again. Realizing his fate, Connors first feels confused, then trapped. Finally, though, he’s overcome with a sense of opportunity. (Why not eat a dozen doughnuts if I’m just going to wake up tomorrow like nothing happened?) While the mental leap from doughnuts to domiciles may seem incongruous, bear with us because Groundhog Day’s goofy premise actually provides some useful insight into the current Denver real estate market.
Last summer, the inventory of homes for sale in the Denver area hit an all-time low—about 6,400 homes on the market in June 2013. (Equilibrium is usually something closer to 17,000.) The imbalance caused, at times, a frantic market that significantly favored sellers. Owners would list their homes and immediately receive multiple cash offers higher than the asking price. Buyers tried anything to gain an edge. “I asked my clients to write letters appealing to the sellers about why they wanted the homes,” says Patrick Finney of Finn Real Estate. “Then I would hand-deliver the offers.” It was an old-school concept, says Finney, who admits he wouldn’t have thought to employ the strategy five years ago. Then again, it wouldn’t have been necessary in, say, 2009.
7,094: Number of Denver homes on the market at the start of 2014. Roughly 17,000 is ideal.
A year after the height of the frenzy, we’re experiencing something of a Groundhog Day phenomenon. Prospective buyers tuning in to the real estate scene this spring will find that inventory is still remarkably tight—in January 2013 there were 7,610 homes for sale in Denver; this past January there were 7,094—but that opportunity abounds nonetheless. “[The lack of inventory] is as widespread as I’ve ever seen it,” says Lane Hornung, founder and CEO of 8z Real Estate, who goes on to explain he is, however, hopeful the market will loosen slightly throughout the late spring and summer. “I think we’ll see move-up buyers come back to the market,” Hornung says. “Typically, they’re selling at an entry-level price—and that could free up a little bit of inventory.”
Regardless of the constricted inventory, possibilities exist in what 8z’s Ryan Carter refers to as a “smart market.” “Buyers aren’t rolling over as they had been,” Carter says. “Sellers are still buzzed from the shift in the market, and they think they can overprice a property and it will sell. But if you have a lame duck property—no garage where you need a garage, for instance—those aren’t going to get scooped up right away like they did last year.” All of which means if you’re a seller, making sure your home is in good condition before plopping it on the market is, once again, required. Conversely, if you’re a buyer: Making peace with the fact that prices are high may be a necessity, but being patient enough so you don’t pay a premium for an undesirable home is the smart move.
While Denver’s problematic inventory numbers have complicated the market, there has been one upside: appreciation. Denver homes continue to gain value at a rapid rate. “It’s staggering how great the market is,” says Your Castle Real Estate owner Charles Roberts. “There are only three neighborhoods that went down statistically.” The average Denver home gained about 10 percent in value in 2013 (even six percent is considered a good year), and 2014 looks as if it will be similarly strong. If that turns out to be the case, perhaps we, too, will decide the Groundhog Day scenario we’re experiencing isn’t so bad after all.
—Photograph by Dan Saelinger/Trunk Archive