The prolonged nature of the COVID-19 pandemic has created a housing market driven by more emotional decisions.
Husband-and-wife Justin and Amanda Choi sold their Berkeley home for 20 percent over the asking price back in April. The home, listed for $645,000, received dozens of offers and was under contract in just four days for $775,000.
“Even on day one we got offers at like $740,000 or something like that,” Justin says. “I think my exact words were, Have people lost their minds?”
To someone not buying or selling a home, hearing these numbers might make you wonder if people in Denver really have lost an understanding of what a home should be worth these days. Elizabeth Sacerdoti, a realtor with Kentwood Real Estate, says that’s not the case; COVID-19 created market factors like we’ve never seen before, driving people to consider emotional needs, along with financial ones.
From January to July, Sacerdoti says she didn’t write a single offer at or below list price and typically saw homes sell for $50,000 to $300,0000 over list price. “I started seeing a correlation that a lot of homes started going for around 14 percent over [list price] pretty regularly. And initially, that was really astonishing,” Sacerdoti says. She soon discovered buyer’s perspectives were shifting.
In addition to overbidding on a house, buyers were willing to negotiate terms, like inspections and appraisal gaps, or lease the home to the previous owner for a period of time.
“What I came to find out is that the consequences of the pandemic on people’s emotional needs for housing was something that we really needed to quantify,” Sacerdoti says. “I feel that, as a realtor, it’s my responsibility to make a purchase a sound, financial investment. The conversation changed to start adding in what people’s emotional needs to get through the pandemic looked like as it related to housing.”
The first part of the year hasn’t been driven by typical factors, according to Andrew Abrams, chair of the Denver Metro Association of Realtors’ Market Trends Committee. “For the most part, we were kind of defying logic or the data,” he says.
As that demand for single-family homes continues, many buyers are turning to condos and having to make similar decisions.
Although condos in the heart of Denver didn’t sell very well last year, Jenny Usaj, a DMAR market trends committee member, says sales are looking up as businesses reopen, with some condos even selling for more than the list price, she says.
In fact, several of the condos at the newly built Lakehouse near Sloan’s Lake have sold above asking price, says Brian Levitt, president of Nava Real Estate Development who developed Lakehouse. But this isn’t uncommon. In the U.S., the average condo sold for above asking price in May and again in June, according to recent data from Redfin.
As for single-family homes, CEO and co-founder of BSW Real Estate Bret Weinstein notes that Denver’s housing market seems to be slowing down and finally experience the seasonality we were used to before the pandemic. “We’re finally reaching this point where we’re getting more inventory, we’re starting to slow down a little bit. We didn’t have seasonality in 2020 at all,” he says.
But even so, homes in July still sold for over asking price, according to DMAR’s trends data. Abrams says he thinks the market will remain stagnant for the rest of the year with homes selling for more than their list price during the first weekend they are available and at or below the list price on the second weekend.
It’s the continuation of a trend of emotion-based decision making that’s caused 2021’s market to feel reminiscent of an auction, where buyers get caught up in winning. “I think in theory, that’s bad practice, but house prices have appreciated since then. So the people that overpaid really are probably sitting in equity now because a month or two later everyone’s using those comps from which they bought,” Abrams says.
In essence, homes are worth what people are willing to pay—and when the demand is there, people will often pay more. Peter Winscott, sales director at Orchard, says buyers realize if they don’t go over the list price, someone else will. “Everybody, at the end of the day, has to decide what’s going to meet their financial needs. I think the fear of missing out on a home is more important to customers than necessarily how much they’re paying,” he says.
That’s exactly what led buyers Jon and CJ Bathgate to purchase a home this summer. The couple started casually looking at houses this spring with the goal of moving in the next 18 months, but the Bathgate’s felt pressured to buy a home—and fast. “The extra pressure sort of sped up our timeline a little bit because all these great houses were going so fast,” CJ says. “We needed to act now.”
So they did. After putting in two offers and being outbid, the couple finally landed a home on their third try. The Bathgate’s said they bought a home near Cherry Hills Village for less than 10 percent more than asking price.
“We ended up in our dream home,” CJ says. “I keep saying it every day, ‘I can’t believe we got this place.’ I’m over the moon and it sort of eclipses all of the heartache and anxiety and intensity that went into the whole process because eventually, when you do cross the finish line, that feels really good.”
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