One of the key indicators that I keep a close eye on is months of inventory (MOI), which tells us how many months it would take for all the current homes for sale on the market to sell. Simply stated, a higher MOI benefits buyers while a lower MOI is an advantage to sellers. The chart below shows the average MOI in Denver from 1985 to July 2016. You’ll see that during the past five years, Denver has been a “sellers market” for real estate and as of July 2016, there is an average of 1.5 MOI on hand.
However, if we break down the average and look at MOI across various home sizes, we uncover some interesting insights and one very unique opportunity. Take a look at the graph below, which shows MOI against square footage. On the left axis, you’ll see home sizes listed from the smallest 10% (under 1000 SF) to the largest 10% (over 3400 SF), and size buckets in between. The middle bar chart shows the MOI as of July.
There is less than one month of inventory for homes under 1850 SF (0.9 MOI, a very strong sellers market) and these smaller homes are selling quickly and typically above asking price. Clearly, if you have a home in this size range, it’s a great time to sell. However, if we look at the biggest 10% of homes (those greater than 3400 SF), we see these are taking longer to sell and there is currently 6.4 MOI available. If we look back at our MOI chart above, anything greater than 6 MOI falls into a buyers market. Even in this hot Denver market, these larger homes are taking significantly longer to sell (72 days), and sellers are likely entertaining offers at or below asking price. So, if you are shopping for a home in this size range, it’s a great time to buy.
Why This Matters
If you own a smaller home, particularly in the 1500 to 2500 square foot range, and are interested in moving up to a larger home, you’re in a rare position of strength when selling AND buying. You will be selling in a “sellers market” and buying in a “buyers market.” While this may not be unusual when homeowners leave one city or state for another, it’s extremely rare for it to coexist in the same geographic market.
So, if your current home is feeling a bit tight, give me a call to discuss options. Interest rates are still historically low and there is no better opportunity to cash out on the equity you’ve built in your home and move up to a larger space.