See it coming!

Friday, 06 September 2019 14:51
Navigating a Transitioning Market: See The Real Estate Market Change Coming


One of the greatest blessings that I ever had in my real estate career was starting in one of the two worst Denver real estate markets in 80 years. In 1981 the oil and gas industry was an overwhelming majority of the metro Denver economy. The oil commodity prices crashed that year and subsequently decimated the real estate market in Denver. Some neighborhoods dropped 30%, others over 50%. I was in 1st grade and learned absolutely nothing from that market correction that year.

The second was an the international “great recession” that began in 2008 and did not recover until October of 2012. I began my real estate adventure in late 2009 / early 2010. The absolute bottom of the market. Lucky me, right? Absolutely…lucky me! I was forced to become an expert on the market and make it happen when others were going out of business by the thousands. I am often complimented on the current levels of business that our firm now conducts. I am proud of that to be sure. What I am most proud of is surviving until 2013, growing ever year from 2009-2016. I learned the most important lessons of my professional life over those years. More importantly for our clients, I became a student of the economy, an expert on the real estate market and….. wait for it….. a clairvoyant.

Once You Know The Pattern, You Can See the Real Estate Future

Indicator 1. Days on Market

A clairvoyant? Am I serious? Of course not! I am clearly not a clairvoyant. Here are the key signals that the market is turning in Denver. At the peak of any real estate market, you will experience homes selling immediately, over asking price and you will be competing with multiple offers. That is the top of the market. When things begin to turn, the first thing that happens is that average days on the market start to increase. In up markets and down markets it is easy for the average consumer to get caught up in the media hype. Let’s set one thing straight. An actual balanced market is when the average days on the market is 180 days. This means from the time that you list your home until you close is 180 days. Therefore, in a hot market that might have an average days on market of 14 days, a shift to 25 days is not a huge deal or a significant indicator. If the CDOM (current days on market) moves from 14 to 25 to 50 to 80 over three to six months, the shift has begun.

Indicator 2. Expired and withdrawn listings

– The next thing you will begin to see are withdrawn and expired listings increasing. These are essentially when a home is listed, does not sell and is removed from the market.

BREAK TIME

There are only 4 things that matter in selling your house in this order of importance. They are:

1. Your Agent, Brokerage Firm and Marketing Plan

2. Your Home’s Location

3. Your Home’s Condition

4. Your Listing Price

END BREAK TIME

Back to indicator two, Withdrawn and Expired listings – These only happen for one reason. The seller thinks that something other that these four things have prevented their home from selling. It is ALWAYS one or a combination of these four things. If you see a listing that has been on the market over a year and has been listed with 2/3 different firms, the sellers just flat out don’t get it. Eventually, reality will settle in or the home will never sell.

Indicator 3. List to Sell Price

This is a measure of how close to the asking price the seller gets when they sell. If the home is listed at $1M and sells at $900k, that is 90% list to sell. In the peak market discussed earlier that list to sell might be 105%-115%. After the days on the market increase begins, then the withdrawn and expired listings increase, the final indicator is the list to sell percentages begin to drop.

There you have it. If you have a basic understanding of these three metrics, you too can see the market coming. Up or down. From a terrible market like we had in 2010 to a recovery, these same three factors happen in the reverse order.

I tell my clients all of the time that I never feel like I am working. I am just messing around with all my friends all day. That is 100% true buy I am also like a duck swimming on a pond. Above the water, I am casually floating along. Below the water I am paddling like a wild man.

Real estate is my passion. If there is anything I can do to assist you, a family member, a friend or a co-worker, please let me know. Anywhere in life’s journey, real estate or not, it would be my pleasure.