Are Home Prices Really Dropping?

Stories about home prices dropping locally and nationally. The media headlines are misinforming and I believe scaring consumers. Home prices are not dropping. First, home price appreciation is SLOWING DOWN not dropping. This is great news! For much of the last 2 years we have median home sold prices increasing by over 20% year over year. In May, this number dropped to 14.8% year over year. I am hopeful that our year over year appreciation rate will drop below 10% by September.

Second, home LIST prices are dropping. One member of our SMDRA Stats Team pulled stats on June 14th and found that 28% of homes listed for sale in the last 30 days and NOT under contract have experienced a listing price drop. And 8% of homes listed in the last 30 days and under contract have experienced a listing price drop. And 10% of homes listed and closed in the last 30 days saw a price drop.

Every summer our Stats Committee talks about the listing price drops that our market experiences. Listing price drops are normal and customary here in metro Denver. Some years this starts about Memorial Day weekend and sometimes it starts as late as the 4th of July weekend. This year it happened earlier in May. Why? I am sure the increase in mortgage rates to > 5% by then had an impact.

Second, our real estate market witnessed the strongest 4th quarter EVER with more sales and higher price appreciation and more bidding wars last year. Normally our RE market cools off in the 4th quarter and it didn’t last year. So, instead of our buying season starting in January or February it actually started last October. Thus, the market cools off sooner this year than previous years.

Let me end with this about list prices dropping and I bet every one of you has experienced this multiple times over the years. The Smiths list their home in June at $700k because the Jones’s a neighbor listed their home for in March for $600k and sold it for $675k. The Smiths think their home is worth more now than the Jones’ home and so they list their home for $700k It doesn’t sell for $700k so they have to drop the price. Was the Smith’s home ever worth $700k? NO!!!

But, the Smith’s believe that the summer is the best time to sell a home as that is what the media tells them. The media are stinking wrong!!! This may be true in other cities; but it hasn’t been true in Denver for at least 10 years. If you want top Dollar for your home in metro Denver you need to list in March or early April. Most likely the Jones’ listened to and trusted their Realtor; whereas the Smith’s didn’t listen to and trust their Realtor. Instead, they trusted the media.