The Downtown Denver Market: Primed for Investment?

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Real Estate

 

By Renee Cohen

 

It’s a new year, yet when it comes to the Denver real estate market, the story is the same. The Denver real estate market is crazy. Period. End of story. And this is nothing new. It’s a market that continues to be characterized by very little inventory, astronomical numbers of showings on any homes debuting on the market, ridiculous multiple-offer situations stipulating unfathomable over-asking offer prices and inspection and/or appraisal waivers, and a plethora of cash offers from buyers hoping that cash will be the factor that gives them the edge in this unbelievably competitive market. Buyers are having a hard time actually scheduling to see houses (87 showings on one home in one weekend…) let alone offering on them.


Market statistics reflect the craziness in the market as well; average Days in MLS (DIM) is extremely low, Close-Price-to-List-Price (CP/LP) ratios are extremely high, and the inventory level is shockingly low. Across the metro area, the story is consistent, and individual neighborhood markets depict these same conditions; however, one neighborhood market, in particular, illustrates a different story and that neighborhood is Downtown. 


Why the discrepancy in the Downtown market and what’s causing the difference? And who stands to benefit from that anomalous market? Let’s take a look at three statistics for a more in-depth explanation.


The statistics – DIM (Days in MLS or Days in Market), Closed Price/List Price Ratios, and Months of Inventory (MOI) – really are shocking in the story they tell. The current DIM across the metro area is 23 while the current DIM in Downtown Denver is 93. The current CP/LP Ratio of the metro area is over 100%; contrast that with the CP/LP Ratio of 93.5% in the Downtown market. And, the MOI across the metro area is 2, while in Downtown the MOI is 9, effectively making the Downtown market a buyer’s market – something we haven’t seen anywhere in metro Denver in quite some time. 


To what can this difference in the market climate Downtown be attributed? The short, high-level answer is COVID-19. When the pandemic shut down life as we know it almost a year ago, people began working and learning remotely, and they quickly realized living in proximity to work was no longer a priority and they yearned to live in a less dense area. Many people, most of whom were not considering a move pre-COVID, all of a sudden found themselves wanting to trade the hustle and bustle of the city lifestyle for a slower pace and more space; they began an exodus from Downtown to more suburban areas where they could afford more space inside their homes and enjoy the outdoor spaces around them. 


The mass exodus meant more inventory in that specific market, hence the reason the Downtown market can be considered a buyers’ market. One segment of the buyer pool who is excited about this inventory excess? Investors. With a 93% average CP/LP Ratio and a 9-month supply of inventory on the market, there are more properties from which to choose and investors have room to come in lower on price and negotiate with sellers to try and get a better deal. Let’s be clear – this market is not a fire-sale market and sellers aren’t desperate, but if there is a “great deal” to be found in the virtually deal-less Denver metro market, it’s likely to be found in the Downtown market. 


If you have been sitting on the sidelines waiting for the right time to buy an investment property, now might be the opportune moment you have been hoping for. Leverage the market stats when evaluating prospective properties and structuring offers in order to negotiate the best deal possible. Good luck, investors!