More homes are selling. Prices are rising. That’s been the trend for 3+ years and the trend continued in February. No surprises there.
However, here is a trend that is not getting much coverage: There is more than the normal amount of transaction fallout occurring right now. Fallout is when a property goes under contract but then fails to close
Even though more homes are selling this year versus last year, a much higher percentage of properties that go under contract are not getting to the closing table on the first try.
Why? Inspection issues, low appraisals and loan qualifying glitches can keep a deal from getting closed in any market. Right now, however, there may be an additional factor, namely, early buyer’s remorse.
Buyers are frequently competing against multiple offers on a property. There can be a tendency to just want to win. When they become the successful bidder and the dust settles, they may see a property’s shortcomings. Since purchase contracts provide a number of outs for buyers, they may use one of these contingencies to terminate the transaction.
It is kind of like what happens with the TV show, The Bachelor. In just eight weeks, a Bachelor or Bachelorette is supposed to find his or her soul mate for life from among 25 possibilities. The twenty-five “contestants” can get pretty focused on becoming the chosen fiancé. That decision can look a little different a few weeks down the road. Not surprisingly, only five of the couples from 30 seasons of the Bachelor over the last 13 years have actually ended up married.
Real estate purchase decisions made quickly and under pressure may be reversed quickly also. While more transactions than normal are falling apart shortly after going under contract, it is not the end of the world. Sellers quickly find another willing buyer and buyers learn from the experience and make a better choice the second time around.
Here’s the summary of market performance this February compared to February of 2015:
The stats above are for sales activity in Adams, Arapahoe, Broomfield, Denver, Douglas, Elbert and Jefferson counties. It includes homes sales handled by real estate agents though Metrolist/REColorado®, Inc., the MLS system serving the metro Denver area.
You can see a more extensive breakout between the single family and multi-family segments of the market by clicking on the links at the end of this post. Be sure to take a peek.
If you like the look of those reports, I can produce one for you that is specific to your zip code and property type. The market is not uniform. Your part of town may be doing better or worse than the metro-wide averages.