The Truth about Denver's Home Inventory

By Michael Canon and Lon Welsh, Your Castle Real Estate.

If you have not heard already, the inventory of homes on the market in Denver has been declining. This is not true in many regions of the country. If you often only see national headlines, you might not be aware of this favorable news. Our market has some unusual factors at work. Let’s explore them, so you can take advantage of the opportunities out there.

If you look at the first chart, Months-of-Inventory (MOI 1), you’ll see the MOI for Denver’s suburbs on the bottom axis and the average sales price in that suburb on the axis on the left side. Denver metro currently has about six months of inventory (a balanced market, on average), but there is a lot of variety from one city to the next. Lower cost areas, such as Thornton, are seeing inventory move fast. Sellers (mainly banks) don’t have to wait long for offers. Thornton’s average price in the last year was around $250,000 and the average MOI was about 3 months. Greenwood Village, on the other end of the scale, had about 13 MOI and an average price of about $1.4 million. Sellers are suffering there. The city of Denver is about in the middle.

If you look at the second chart (MOI 2), you’ll see the MOI information sorted by the price of the home. The city of Denver, for example, has many neighborhoods with homes under $100,000, and they are selling fast. On the other hand, upscale neighborhoods like Cherry Creek and Hilltop have significant levels of inventory and it’s taking a long time to get homes sold, especially over the $1 million price barrier.

The left part of the chart shows what percent of the active listings are bank sales (REO - in red) and which are regular sellers (in green). For homes priced between $0 and $100K, regular (e.g., non-bank) sellers are 17% of the active inventory, but only 12% of the sales in the last twelve months. On the left that since they are not getting their “fair share” of the sales, the MOI for the regular sellers under $100K is 2.7 months. For REO under $100K, it’s a blazing 1.9 months. This probably isn’t a surprise to any investor that has written an offer for a low priced REO and the listing agent has told them their buyer is competing with ten other offers. It’s a strong seller’s market at this price point!

Compare the homes from $480K to $1MM. Here, MOI is around 14 months - a very slow market. Marketing time depends greatly on the price.

Product mix, neighborhoods, percentage of bank sales, square footage of homes all need to be analyzed before onemakes a real estate investment decision is this market.

Can you do that with confidence?

Source: Your Castle Real Estate analysis, MLS data