As I have always advised clients one will rarely sell at the top of the market or purchase at the bottom. It happens as does winning Powerball i.e. right time, place and lot’s of luck.
Within the last month I have witnessed challenges to the market. At first I thought it was anecdotal based on eyeballing activity on the MLS, the proliferation of For Rent and For Sale signs and in discussions with peers. Yet it finally hit home on a listing I have.
Monaco Place is a popular condo complex located close to I-25 and Hampden Ave. The complex went through some rough times including the infamous shooting of a Denver Police Officer in 1997. During The Great Recession units were being foreclosed on a regular basis. The buildings also fell into disrepair related to the facades, roofs and common areas (most of the complex was built in the early to mid 1970’s). During the period from 2009-2014 one and two bedroom units were selling for under $65,000, this was not an anomaly.
Of course astute buyers saw the value in the complex including a great location, units with wood burning fireplaces (a rarity), low taxes and an HOA fee which includes heat and air-conditioning coupled with large open common areas, deeded covered parking and other positive attributes.
Earlier this year two two-bedroom units sold for new records for the complex:
In March of 2018 3307 S Monaco Parkway Unit C was asking $200K and sold for $215K after just 5 days on the market.
One month earlier in February 2018 3319 S Monaco Parkway Unit A was asking $200K and sold for $216K after just 4 days on the market. Of note, there was a $1,500 concession, thus the true sold price was $214,500.
In April of 2018 3311 S Monaco Parkway Unit C came on the market at $199,900 and closed at $209,500 after 4 days on the market.
The three sales were impressive and many brokers including myself thought those two sales would set a benchmark for the upcoming spring/summer sales season. All three were nicely updated and of similar quality. Based on averages, the three units sold for just over $213,000 with an average 4.3 days on the market before going under contract.
May 2018 saw little activity within Monaco Place, which was surprising with 2oo+/- units and a price point and location that is in high-demand including walking distance to shops, restaurants, supermarket, light-rail, two bus lines and easy access to I-25.
Fast forward to early June 2018. I am asked by a client to place his unit on the market 3351 S Monaco Parkway #F. A nice 2BD/2BA on the top floor of one of the south-central buildings adjacent to parking, steps from the indoor pool/workout facilities and the coin-op washers/dryers just steps from the entry.
The unit was renovated including new paint, flooring including wood and carpeting, replacement of the hollow core with solid doors, kitchen renovation including tile backsplash, granite counters and stainless steel appliances. The bathrooms also remodeled with granite and wood and all updated electrical. The unit, a top floor also offers vaulted ceilings and views onto the open-space surrounded by mature trees thus insuring privacy.
Based on the sales comps we wanted to be fair yet aggressive thus on June 6th we placed on the market for $209,900. The asking was based on the prior 3 sales as noted earlier in the blog. Showings were limited and little interest. We were surprised again based on recent re-sales.
After 2 weeks we adjusted the price to $199,000 coming in just under $200 PSF. Showings have increased and multiple brokers have advised offers will be sent in the immediate future.
I am confident we will have the unit under contract before the end of the week.
My concern is as follows:
- Were we overly aggressive pricing at $209,900? While the other three units came on at $199,900 and $200,000 they all sold for above $210,000 or more than 5% over asking. Even at $209,900 we were priced lower than at the price the past 3 re-sales closed.
- Did the 5% price reduction open the floodgates? Again, based on past re-sales which are within the public domain one could argue instant equity even at the higher asking.
- Did mortgage interest rates play a role? In Feb 2018 the average 30 yr. mortgage was at 4.32%. In May the rate was 4.61%. As of today (June 19th, 2018) Wells Fargo is quoting 4.75%.
Thus interest rates may be one factor i.e. higher rates increase one’s payment and subsequently can impact housing prices downward over longer periods. Yet historically interest rates continue to be at record lows.
While the economy continues to gain steam nationally is Denver still experiencing the influx of buyers? At a recent closing in conversation with the title company closer she mentioning having two deals close earlier in the day; both sellers native to Denver moving out of state to buyers moving to the state flush with cash from their out-of-state sale. It seems the blockbuster pace in in-migration may actually be slowing and out-migration increasing as noted in the Denver Post last year: More Coloradans Moving Out….
I have provided statistical evidence in previous blogs concerning the slowdown on the upper-tier of the market. While the sale of $1M+ homes may have set records on a pure transaction basis, the reality is prices on the upper-end are stagnating and adjusting downward as days on market are increasing. And while the overall market set records for average and median home prices during the beginning of the 2ndquarter was that the top?
Monaco Place by most measures is an affordable opportunity where one can purchase with a monthly payment that is less than comparable rent. Yet to generate activity my seller had to reduce his asking by 5% now at 7.5% less than comparable sales in the 1stand beginning of the 2ndquarter.
Is this a seasonal shift i.e. summer vacations or a signal that the market is plotting a new course? Only time will tell. However while the spring season used to be known for sizzling activity so far this season like the weather has been cool and mild.
Will keep you posted when the listing closes and what the final sales price will be.
Wish me luck.