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Selling a Home Category
Clients ask me all the time: Leigh, what do you think of Zillow? I think Zillow is a data point…and, typically a very poor one! Anyone who makes a buy, sell or hold decision for their most valuable investment based upon Zillow’s Zestimate should have their head examined. I’m not kidding. Do you think Zillow’s famous algorithm takes into account a home’s floor plan? How about a home’s condition? Landscaping? Age of windows, roof and systems? Garage age and usability? And, most importantly, location within the neighborhood?
Even if all of those qualitative attributes are considered by Zillow’s algorithm, does Zillow even have the correct quantitative data to accurately give you a value based on your home’s square footage? Do they consider seller concessions? How do they adjust square footage when it’s not reflected correctly in public records (happens all the time)? Do they delineate between above grade square footage and below grade square footage? If only valuing a property were as simple as Zillow would have you believe, buying and selling a house would be easy! If Zillow were accurate, you could just order a house with a click of the mouse from the comfort of your living room couch…and life would be swell!
Seriously, don’t rely on Zillow! Here’s an example that strikes close to home (literally, my home!) where Zillow has gotten it completely wrong! The house at the end of my block sold in April, so I was super interested in this sale and the ultimate value of this comparable home when it sold last year. I mean, it’s a Denver Square…just like my house. It’s in a similar condition and has 3 beds and 2 baths upstairs just like my house. It only has one car garage, however, and it’s one house off of busy 8th Avenue…I hope that Zillow adjusts my value relative to its value for these factors. Well, let’s see…
It sold for $58,000! $58,000? What? I mean WHAT?! Those buyers got the deal of the century!…a Central Denver home for $58,000! Oh, wait…That can’t be correct. Oh, okay…Phew…Zillow is wrong. According to the MLS, it sold for $580,000…just a slight typo I guess (that still hasn’t been fixed after 11 months!). Ok…let’s look further. Wow, it’s 2,914 SF? Really? That’s bigger than it looks! Oh, okay…according to the MLS, it’s actually 2,132 SF above grade, but Zillow is combining above and below grade square footage and counting it like it’s all the same. Hmmm…interesting. I wonder if Zillow has accurate data on my house. Wait…Zillow has my house listed as 1,708 SF which is correct but only reflects my above grade square footage, so Zillow isn’t giving me any credit for my basement and is treating my neighbor’s basement like it’s above grade!
Luckily, I pay no attention to Zillow when valuing homes…and, you shouldn’t either!
Home prices continue to rise across the country and Denver has now added a 12th consecutive month to its tally of year-over-year price appreciation according to Case-Shiller data released on 2/26/13.
While the rest of the country has been on a decade long housing price roller coaster, Denver has weathered the storm in a much more controlled fashion and is now leading the way out of the recovery with an 8.5% year-over-year price increase across the metro area and double digit gains in many of the Central Denver neighborhoods. With inventories at an all-time low across the metro area and a market that’s flooded with buyers hungry to find homes before interest rates increase, if you’ve been thinking about selling but were waiting for the right time, now is finally a great time to make a move and put your house on the market!
The Denver area housing market has experienced 11 consecutive months of positive year-over-year price appreciation according to the Case-Shiller housing price index. The most recent month of data released (November 2012) showed a 7.8% increase over the prior year…this is the largest price increase in over a decade! Inventory remains low in 2013 which will continue to put upward pressure on prices.
Regardless of your position on the current zoning debate taking place right now in the Highland neighborhood between the No High Rises in West Highland Group and RedPeak Properties, one thing should be completely clear…as a home owner, you must understand the Denver zoning code, you must know how your property is zoned, and you must know how your neighbors’ properties are zoned!
Even if you have no thoughts of ever developing your property or changing the external appearance of your home, your neighbors may not have the same plans for their home and their plans could greatly impact your property’s value. Fortunately, most of Denver’s Zoning code is logical, and you probably won’t be surprised by the zoning of your neighborhood, but that also might not be the case…
To find out the zoning of your property, refer to the Denver Zoning Map. Simply type in your property’s address and click search. For example, typing in “3220 Meade Street” returns the map below showing that the property is zoned U-MS-5 (which basically means…”Urban - Main Street - 5″ where the 5 more or less refers to the number of allowable levels).
To find out exactly what the zoning of your property means and specifically what type of development is allowable on your property or on that of your neighbors’, download a copy of the Denver Zoning Code. Doing a quick find on “U-MS-5″ will bring you to the following short description followed by a ton of details which pretty clearly describe what the City will allow to be constructed.
Now, if you’re a home owner on a residential street like Meade St. in the Highland neighborhood and you discover that you’re zoned U-MS-5, you probably won’t be too happy to read the above description and should probably start getting involved in your neighborhood association! If, on the other hand, you’re a landowner/developer who wants to build some high density apartments near the popular 32nd and Lowell retail area, you’re probably pretty happy to read the above description and should get your plans submitted for permit asap!
If you check out the Denver Zoning Code and have questions, contact Red Door Properties to discuss.
Denver Colorado has great fundamentals for investment in single family homes. Check out this national news video to learn why…
Factors that are causing Denver to be prime for residential real estate investment.
- In-migration from all over the country – the life-style in Denver is a major driver…relatively low cost of living, high quality of life, fresh air, outdoor sports, etc.
- Young population – average age = 31
- Unemployment well below the national average
- Foreclosure rate half the national average
- Stable housing market – recent trends more of a correction than a crash
- Apartments: An apartment building price is based on the building’s net operating income and a cap rate. Net operating income is really driven by rental rates. So, as apartment demand has increased, rents have also increased (simple supply/demand economics…apartment demand is growing faster than apartment supply in Denver) which has in turn has caused apartment building prices to rise. So, although you can get a great NOI on an apartment building right now, you have to pay a premium to acquire the asset.
- Single Family Homes: A single family home price, on the other hand, is based on comparable sales. The recent recession was driven by a major correction in the housing market which has left housing prices in Denver an average of 11% below the August 2006 peak (Case-Shiller). So, while apartment building prices are on the rise, single family home prices are either continuing to decline in some areas or are relatively flat in other areas creating great single family home investment opportunities throughout Denver. Rents for single family homes are rising just like they are for apartment building rental units, but the underlying asset can be acquired at a discount making the investment in a single family home attractive.
How does the Denver real estate market compare to the rest of the country? Here are a few take-aways from the Case-Shiller 20 city index with data through August 2011…
- None of the 20 cities has recovered from the market crash yet
- Denver is still down 10% from its August 2006 peak
- Dallas is the only city in the 20 city index that is closer to its peak (Dallas is down 7% from its June 2007 peak).
- Vegas has fared the worst and is still down 59% from its August 2006 peak.
A little more detail on Denver’s real estate price trends…
The graph below shows Denver’s year over year price changes plotted on a monthly basis (click on the graph to see the detail). You can see the tax credit bump in the summer of 2010 followed by worsening depreciation through April of this 2011. Since April, you can see the depreciation continuing but getting smaller and smaller each month with August 2011 down only 1.6% from August 2010. Hopefully this trend will continue and Denver will reach true price stabilization in 2012.
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Compared to the rest of the nation, it’s pretty darn good to be a homeowner in Denver! While the national housing market continues to struggle, Denver shows signs of a recovery…albeit in fits and starts! Looking at the raw housing data from the month of May, most of the key data point to continued growth in the local housing industry. Are you looking for a home right now? I bet you have noticed the very limited inventory of available homes. Here’s why….
The available inventory of properties in the Denver area decreased almost 17 percent from the same time last year. That means there are nearly 3,000 fewer homes and condos on the market right now than there were in May 2010! The number of properties under contract increased 23 percent from the same time last year and that number doesn’t include the nearly 1,700 pending contracts waiting for bank-approval to close. Arguably, if we include the pending contracts, the number of properties under contract in May 2010 compared to May 2011 increased nearly 50 percent! On the flip-side, the number of sold properties decreased 14.5 percent from the same time last year, but remember that the May 2010 sales number was artificially inflated due to the home-buyer tax credit.
Additionally, there have been several recent reports that homes in Denver are selling faster than in any other major market, and our monthly housing supply was 5.2 months while the national monthly supply was 9.2. Lastly, did you know the average Denver homeowner realized 3.6 percent appreciation in the value of their home from 2010 to 2011. And from 2009 to 2011, the average home appreciated 6 percent! Not too shabby. The unrealistic days of seeing 10-20 percent year-over-year gains may be gone, but what we are seeing now is solid, sustainable growth…and as an owner/investor in real estate, that’s what you want!
The local economy appears to be humming along nicely, too. We have seen a recent influx of relocations to the Denver area in both the federal government and oil/gas sectors…and other industries are hiring as well. Colorado’s unemployment rate continues to fall as over 11,000 jobs were created here since the start of the year. For the “fits and starts” we mentioned above to go by the wayside, however, we need to see stronger, more consistent job growth.
The biggest driver for the recovery just might come down to home affordability. In other words, when a buyer considers renting, does it make more financial sense to rent or buy? With our vacancy rate in Denver at an all-time low of 1.8 percent (yes, that’s right…1.8 percent!), landlords are raising rental rates and potential tenants are competing for existing rental inventory and wondering if it just might make sense to buy instead of rent. Try out the Rent vs. Buy calculator below to see what makes sense for you!
As always, Red Door Properties is up-to-date on the latest real estate market information. Please don’t hesitate to contact me whenever you or someone you know is considering buying or selling a home!
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