The perfect storm for buyers?  Maybe.  

The 10 year Treasury yield, that market measure by which mortgage interest rates move daily, continues its decline amidst economic data of slowing consumer spending, lower household savings, rising household debt and lower than expected employment in the private sector and non-farm payrolls driving national unemployment to 4.2%.  

Apr 25, 2024 hit the highest 12 month mark of the 10 year treasury, followed by the last 4 month slide of almost 30% from 4.79 to 3.7 driven by a host of economic indicators suggesting a recession is looming and the Federal Reserve is destined to cut interest rates to spur business activity.

What has this meant for the real estate market?  

  1. Mortgage rates moving lower and lower
  2. Driving buying opportunities for serious buyers 
  3. Amidst higher inventory and motivated sellers  

A 30 year fixed conventional loan is rapidly approaching 5.5% and government loans are hovering just above 5%.  Declining real estate prices moving into the slowest time of the year for the real estate market means motivated sellers, price reductions, seller concessions and offers well below asking price.  

Add in lower interest rates and you have a sense of the greatest affordability for home buyers we’ve seen since spring of 2022.  

Buyer Activity

Once again this translates to stellar seasonal buyer activity at 23,754 home showings last week across the 7 county Denver market, almost double the same time last year.  

But once again, buyers are showing patience in their purchasing decisions, taking on average 32.27 showings per property, to receive a contract.  

While sellers should be hopeful by witnessing declining interest rates and the ongoing buyer enthusiasm driving showings, sellers must be incredibly aware of buyer power driving offer structure.  

Nature of Contracts

In addition to declining interest rates, there are a host of factors pointing to buyer power right now.  Sold price compared to asking price, increase in price reductions, rising seller concessions and elevated inventory.

Sold Price to Asking Price, Price Reductions

Last week the median original list price for all property types was $610,000.  The median home price reduction was right at $10,000 leaving the median final list price at $600,000.  

But the median sold price was $575,000, or $25,000 lower than the final asking price and more than 67% of properties are selling for less than the asking price.  

Factors one and two demonstrating the growing buyer power in contract negotiation.  

Rising Seller Concessions

The word appears to be out, buyers can dictate some pretty aggressive terms.  Last week saw the highest average seller concessions in the history of the Colorado real estate market with sellers agreeing to an average of $9,334 per contract.  

For Real Estate Professionals Only-It should be noted that we are now three weeks past the required MLS changes and it is possible that many real estate agents don’t know how to log commissions paid and are entering commissions as a seller concession.  If this is the case, this data will be useless for a very long time.  

Factor number three pointing to buyer negotiating power. 

Inventory

Expired and withdrawn listings continue to outpace previous years averaging about 300 and 200 properties per week respectively, or a total of about 500 properties each week pulled off the market.  What’s notable is that only an average of about 75 of those properties come back to market, each week leaving 425 frustrated sellers to stay in their home.  

But what’s more notable is the widened gap of new listings to under contract properties and how that continues to keep inventory elevated.  

Each week since mid April of this year, approximately 600 more new properties have come to market than have gone under contract. 

While more properties are being pulled off the market than usual this time of year, simply more sellers are wanting to sell driving inventory higher.  

Last week, 10,134 homes were available for sale compared to 6,335 homes a year ago and just 3,434 homes in 2021.  

Factor number four in buyer negotiating power.  

So the combination of the following factors gives buyers some incredible negotiating power and buying opportunity, the likes of which they have not seen since at least 2019.

  1. Elevated inventory
  2. Driving more seller price reductions
  3. Offers well below asking price
  4. Elevated seller concessions

If interest rates continue to decline, the 2025 spring market will be very busy with rising home values and a boost to market volume.  

Buyers who buy now likely have the perfect storm of the lowest prices, great negotiation, strong appreciation potential and likely opportunity to refinance in 6 months as rates continue to decline.  

Buyers should always be prudent.  Buyers buying today should do so based on money in reserve, security in job and comfort with today’s payment, not future payments based on refinancing.  But if the market goes the direction we expect, today’s buyers will be quite happy.