DENVER — Supply still can’t keep up with demand in the metro Denver housing market. That’s the biggest reason, but why? Who really wants to live in Denver instead of Colorado Springs or a Ski town like Aspen (the most expensive 8000 ft real estate in the country), Steamboat Springs or Telluride?
New numbers from the Denver Metro Association of Realtors (DMAR) show the average home sold in just five days in January. Denver was second only to Tacoma, Washington, according to Redfin.
We’re taking a closer look at the boom and whether it will bust. It seems like, right now, there is no end in sight. Is there? Buyers don’t seem to think there is. There is almost a sense of panic in markets across the country, especially in “migration markets” that are targets of people leaving even more expensive areas like California and New York.
Here’s a typical story of a seller’s experience in Denver real estate.
“We bought this house four years ago,” a seller said. “Our kids were six and three at the time and two little boys grow quickly. And unfortunately, we’re just growing out of this space.” On the fortunate side of things, their $700,000 investment in 2016 has appreciated quite nicely.
“We’re listing at $849,900,” the owner said.
The numbers are staggering in metro Denver. According to DMAR, the average home price is now $629,000. That’s a $100,000 jump in one year — up from an average of $530,000 in January 2020.
“It’s almost like the market is drunk,” said a senior real estate adviser with Compass. The forecast is calling for between a 6-10% increase more in price. The sellers in Denver have witnessed that first-hand. “It’s the best investment I’ve made in the last 4 years,” one of them said.
But these sellers are also buyers. “We are going to take the equity from this house and put it on the next house,” the same seller said. They’re keeping a close eye on the market now for a home to buy. If something you like goes on the market, you have to be ready to act on it immediately. You go look at a house thinking it’s doable and then you get outbid.
Bidding Wars In Denver Market
The bidding wars are astonishing.
“I listed a home this weekend for $544,000,” one seller said of a home he listed in Northglenn. “It went for close to $590,000.” It’s an age-old issue — supply and demand. It’s driving the home prices up, astronomically. Inventory in metro Denver is the lowest it has ever been, according to DMAR. Metro Denver experienced record-high inventory in May 2008 after the housing collapse, with 26,000 homes for sale.
Fast-forward to January 2021, and metro Denver is experiencing record-low inventory, just 1,200 homes on the market.
In January, homes stayed on the market just five days. That’s down from an average of 24 days in January 2020. Part of this is droves of people relocating. They’re coming from California, Washington, D.C., New York, Dallas, Texas. If people continue coming, Denver doesn’t have enough houses to put them all in. The work-from-home phenomenon is attracting even more people to Colorado.
People are thinking, “If I don’t need to be in the office every day, why can’t I go get this same house in Colorado? In Denver?” It’s a great market if you’re coming from California or New York. Sadly, the market is squeezing many out. People making under $54,000 a year probably cannot buy a home.
So, what’s next?
Nearly all experts agree there’s no looming bubble like 2008. They don’t see a bust this year. The free market says sell what you can for as much as you can, and that’s what people are doing.
That 2006 bubble was based on mortgage fraud and a variety of other things. That was a poorly-regulated market. Now, It’s just going to be tough out there for buyers. There are a growing number of somewhat sketchy lending practices popping up, like ads promoting the idea you only need $1,000 down. These programs lure buyers into this idea, “Hey, we’ll do it for a $1,000 down, but we’re going to take 20% of your equity when you go to sell.” It’s advisable that you don’t go that route. If you don’t need to, go to traditional CHFA, go to traditional metro DPA. Don’t just go for this shiny carrot. The carrot you should take advantage of at the moment is super-low interest rates.
Right now, interest rates are hovering around 2.8% on a 30-year mortgage and just 2.35% on a 15-year fixed mortgage.
And finally, if you’re selling, experts say don’t get greedy.
That’s because people are savvy. They’ve got Zillow. They’ve got the internet. They’ve got all sorts of things. You’re not going to get away with exaggerated values. Be reasonable. Even though this is a seller’s market, it’s a fair market. If you try to be greedy, the market is going to punish you.
On the other hand, the craziness continues. One listing in February started at $849,900.It sold in one weekend for $930,000. The seller got $80,000 over asking price. That’s further proof, the market is as hot as it has ever been.
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