Almost twice as many sellers now have to drop their list price before a sale compared to July.

In October, 19% of all sales were forced to drop the list price before receiving an offer.  In July it was 10%.

These properties that start out priced too high end up taking four times as long to sell compared to those that are priced right on day one.

The bottom line is this- price matters even in a strong market.

Home builders have experienced their largest-ever increase in building costs so far in 2021.

This is according to the latest Producer Price Index report.

Year to date, building costs are up 14.5%.  This amount tops the previous record of 7.1% which occurred in 2008.

Specific materials which have seen significant increases include lumber, drywall and steel.

The price of steel has risen 117% this year.

These material cost increases combined with increases in items like building permits and tap fees are causing home builders to raise their sales prices.

On Wednesday Zillow announced the shut down of its iBuying program because of mounting financial losses and increasing complexity in the real estate market.

The goal of this program was to buy properties directly from Sellers and then re-sell them for a profit.

Before looking at the interesting facts and numbers associated with this news, we want to acknowledge the people who are affected by this.

Zillow’s workforce will be reduced by 25%.  Many people will be laid off and our heart goes out to them.  We certainly wish them only the best.

Within our company we are not surprised by Zillow’s announcement.  We observed many cases where they over-paid for a property, re-listed it for an unrealistic price, dropped the price over time to meet the market, and then sold at an amount much less than what they paid.

It actually became difficult to find specific scenarios where they sold the home for more than their acquisition cost.  It was not uncommon to see losses of $50,000 per home or more.

Here is a quote from their CEO:  “Our observed error rate has been far more volatile than we thought possible.  Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in.“

In the third quarter of 2021 alone, their iBuying division lost $328 million.

Bottom line, their valuations were off.

It is a reminder that pricing requires a hyper-local scientific approach versus a generic algorithm

Homes are not commodities.  Each home is highly unique.  Each has its own highly unique location, features, amenities, condition and timing.

Homes can’t be priced like a book or a plane ticket.  Every unique feature must be taken into account.

Nationally, Zillow has about 7,000 homes in backlog which it hopes to sell over the next several months.

Other players remain in the iBuying game and we are more than happy to help you understand those options if you are curious.

Here are some fun facts about recent home sellers. This research comes from the National Association of Realtors survey of home buyers and sellers:

• 10 years = the average time recent home sellers have lived in their home. This number has remained essentially unchanged for the last ten years. From 1987 to 2007 the average was 6 years.
• 89% = the percentage of home sellers who use a Realtor to help sell their home. This has been trending higher over the last 20 years. In 2001, 79% of home sellers used a Realtor. As the transaction gets more and more complex, more sellers seek the help of a Realtor.
• 75% = the percentage of home sellers who found their Realtor through a personal relationship as opposed to seeking out an agent they didn’t know.
• 77% = the percentage of home sellers who only interviewed one Realtor for the job of selling their home.

Let’s put today’s home prices in perspective.

Appreciation has been significant over the last 18 months. Some people are wondering if it can last and if there might be a housing bubble.

There are two ways to look at prices. One way is in absolute terms. This is simply looking at the dollar amount a home would sell for at some point in the past versus the dollar amount it would sell for.

The other way is in real terms. ‘Real’ is an economics term which means that inflation is factored into the valuation.

For example, a gallon of milk costs more today in absolute terms than it did 15 years ago. However, in real terms, the cost is about the same as 15 years ago because inflation is factored in. The price of milk has essentially escalated at the same rate as inflation.

So, how about home prices? As we know, prices in absolute terms are higher than 15 years ago. To be exact, prices are 43% higher Nationally compared to 2006 according to Case-Shiller.

However, in real terms, prices are the same as 2006.

Over the last 15 years, homes have appreciated at essentially the same rate as inflation.

One misconception about today’s market is that there is ‘no inventory.’

Actually, there are numerous new listings that hit the market each month. It just so happens that they tend to sell quickly.

The numbers show the number of new listings that came on the market in September closely equate to the number of sales that occurred.

•  In Larimer County, 693 new residential listings hit the market last month and there were 688 sales.
•  In Weld County, there were 681 new listings and 733 sales.
•  In Metro Denver, there were 6125 new listings and 5233 sales.

So, while homes tend to sell quickly today, there is still a significant amount of new inventory hitting the market each month for buyers to consider.

Us Coloradoans are used to making many top-10 lists.

Whether it be best place to live, best place to retire, best place to raise a family, or best place to own real estate, you can usually find a Colorado town or two on these types of lists.

But, here’s one we didn’t make…

The 10 Most Expensive Places to Live

The recent list, put together by Bungalow.com, uses data from M.I.T. and the U.S. Bureau of Labor Statistics.

Colorado is thankfully nowhere to be found in the top 10.

Predictably, Hawaii is at the top followed by New York, Massachusetts and California.

So, while it may feel costly to live here in Colorado, it is not as expensive at many other places.

If you watch the weekly statistics that we produce and post on social media, a number that might be jumping off the screen at you is the average price.

Specifically, it is the percentage increase in average price versus last year that is striking.

We are commonly asked ‘how could average prices increase 20% to 30% in one year?’

It is important to note prices haven’t appreciated up to 30%, it’s only the average price that has increased by that amount.

A key reason why average prices have increased by such a significant amount is that there are many more luxury properties selling this year versus last year.

Sales of properties priced over $1,000,000 have seen a substantial increase compared to 2020.

Look at these numbers which show the year over year increase in closed transactions for real estate priced over $1 million:

• Larimer County = 159%
• Weld County = 247%
• Metro Denver = 137%

So, transactions of luxury properties have much more than doubled compared to 2020 which is pulling up the average sales price in a significant way.