Home sellers in metro Denver appear to be trying to squeeze every last drop out of a historic run-up in prices. But in doing so, they risk getting squeezed themselves.
In the past seven days, through Thursday, 1,433 new homes and condos came on metro Denver's multiple-listing service. But in that same stretch, 1,539 listings underwent a price decrease, notes Anthony Carnesi, CEO and manger at Keller Williams Realty DTC.
"The number of price reductions in the six-county area is greater than the number of new listings," he said.
That's a rare occurrence, and when Carnesi first spotted it in August, he thought it was an aberration that would quickly resolve itself. But the trend of overpricing has been at play for 14 straight weeks, and he is speaking out.
Normally, listing price adjustments spike when the market is turning and prices are on the decline. Sellers and their agents find themselves caught off guard by a "real" price decrease.
But that's not what is happening right now. The median price of a home or condo sold in October in metro Denver rose 5.8% over the past year and is up 1.8% over the past month, according to the Denver Metro Association of Realtors.
Carnesi describes the phenomenon as a "false" price decrease, driven both by greed on the part of sellers and agents unwilling or unable to provide a realistic listing price.
Some sellers may think no harm, no foul — let's try to get as much as we can. But mispricing a home off the bat can cost a seller in a delayed sale, or in extreme cases, no sale.
Listings with a price reduction spent an average of 59 days on the market, whereas one that was priced correctly sold in an average of 14 days, according to the Denver Metro Association of Realtors.
Of course, "correct price" is self-defining. Sellers may not realize they have mispriced until they test the market.
What are some signs a price was set too high? A key one is a lack of traffic at showings. Agents are steering their buyers to listings they consider a better value.
There are also cases where interested shoppers do show up, but they don't make an offer, meaning they don't view the price as reasonable given other alternatives.
After botching the initial listing, sellers need to make a dramatic gesture to get buyers interested again. Offering token slivers of price reductions won't do the trick, Carnesi said.
What makes the mispricing so frustrating is that most sellers are sitting on huge equity gains following a near doubling in home values in metro Denver this decade.
That is much different than at the start of the decade when seller equity was so depleted many had to drain the bank account to complete a closing.
There are other signs of a market shift. A year ago, one out of three homes that went under contract with a Redfin agent in metro Denver had received multiple offers, according to the Seattle real estate brokerage.
But in October, only 6.8% of metro Denver homes on the market received multiple offers. Nationally, the number of homes on the market receiving multiple offers dropped from 38.7% to 10.2%, which represented a 10-year low.
