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As prices set new records, why aren’t Denverites selling their homes?

The median sale price has hit an all-time high of $653,000 in Denver. Inventory continues to decrease, and 1,464 homes sold in May, which is 6% above the last five-year average. Active listings were also down 20% in May. People aren’t selling their homes. The question is, why?

Denver is becoming one of the most expensive cities in the country. The median sale price has increased by 31% over the last three years with no sign of cooling off. Traditionally, sellers move every few years for various reasons — size requirement changes, a neighborhood change, or a lifestyle or work change. People are now staying put because they cannot afford their next home in Denver or fear being unable to secure a new home.

Want more detailed information about the market in your neighborhood? Please reach out!

May 2021 real estate news recap

Looking for a quick digest of what happened in real estate this last month? We’ve got you covered:

National News

+ Even with a housing shortage fueling high demand, builders are reluctant to sign sales contracts for houses as increasing costs are eroding profits.

+ Could home prices could reach unhealthy levels? Logan Mohtashami of Housing Wire believes that without more inventory or higher mortgage rates, we may be heading in this direction.

+ Love cooking on a gas stove or having an alternate source of energy when the power goes out? Stay in the loop about the battle that’s brewing over banning natural gas to homes.

Local News

+ The Denver housing market continues to keep buyers on their toes as 74% of listings go under contract within a week versus 47% nationally.

+ As investors account for one in seven home purchases in Denver, high prices are turning potential buyers into renters.

+ While Denver’s home appreciation rate remains on par with rest of country, the metro area’s price per square foot is nearly 30% more expensive ($242 in Denver compared to $187 nationally).

Financial News

+ Mortgage rates drop below three percent again, offering many homebuyers another chance to refinance to increase their monthly cash flow.

+ As consumer prices rose the sharpest since September 2008, Realtor.com breaks down what this eye-popping inflation means for mortgage rates.

Have questions about what’s happening in real estate in your neighborhood? Let’s chat!

Questions about the Denver real estate bubble that keep us up at night

How long will our fierce, low-inventory, deep seller’s market last? Will it slowly ramp down or will it crash overnight? Are we keeping up with new construction? These are the questions that keep real estate professionals and home buyers up at night!

How is inventory looking?

Every day I look over new homes that hit the market for our clients, a task that used to take up the length of a nice cup of coffee. Now, I can’t even finish my coffee before I run out of properties to view! Over the last seven days, there have only been 204 new listings in Denver and 411 have gone pending. Typically, we measure inventory in months, but we are just shy of 40 days of inventory — days! Denver had 318,445 households as of 2019. An average of 29 homes hit the market each day, which means that only .002% of Denver households are hitting the market each month. Things are certainly tightening up.

How are rising interest rates affecting the market?

As interest rates go up, buyers in the lowest price ranges find themselves forced out of the market. As more of a monthly payment goes toward higher interest rates and not towards purchase power, everyone is shuffled down the totem pole. This reshuffling will reduce buyer demand, but not enough to reshape inventory and get us to a balanced housing market. To significantly increase inventory levels to quell increasing prices, work must be done on the supply side of the equation.

(P.S. We’ll be keeping an eye on the 10-year treasury rate, which mortgage rates have historically been tied to. Glen Weinberg at Fairview Commercial Lending recently published a great write up on the recent inflation jump reported on this month’s CPI Index report and what that means for real estate.)

Can we turn to new construction?

This is where Denver has a severe disadvantage to other cities where “urban sprawl” is an option. Denver is locked in by other municipalities and unable to develop large tracts of land. We aren’t the only city with this problem; as a nation, home building has dropped significantly over the last decade, from an average of 26.3 million homes built per decade from 1970-2010, to only 5.8 million new homes built from 2010-2019. That’s a 77.8% change in the wrong direction! Denver needs new homes to add to the inventory to supplement existing home sales. The city can’t build out, so we have to build up. Increasing density via high- to medium-rise condominium development and finding a compromise to construction defect laws must happen.

Will the market crash?

Lending practices have been corrected since the great housing crash of 2008 and those buying homes are now generally well-qualified. As interest rates increase, I do believe things will start to slow down, but not crash. I mean, we are living through a pandemic that has rocked the world and our housing market is still going straight up! Now, we just need homes to build upwards as well.

April 2021 stats recap: Denver home bidding wars continue to drive up prices

I recently read an article published online by a Denver television network. It was titled: “Home out of range: 65% of Denver homes sell over asking price.” As I began to read, I didn’t even make it through the first sentence before I was met with disappointment. It started, “Littleton, Colorado…” So which is it, Littleton or Denver? Being a stats geek, I had to find out the actual number of Denver listings that closed at or above list price last month, in addition to pulling monthly stats (see below).

We’ve all heard the bidding war stories that are floating around and I knew the number would be high, but the numbers really were astonishing. In April, there were 1,519 homes that closed, and of those, 1,215 sold at list price or above. That means that a staggering 79.9% of homes sold at or above list price! Let that sink in a bit — now it makes even more sense why the median sale price for single family homes jumped another $20k from March, up to $650,000. 😳

Want more detailed information about the market in your neighborhood? Please reach out!

April 2021 real estate news recap

Looking for a quick digest of what happened in real estate this last month? We’ve got you covered:

National News

+ Many older millennials are burdened by housing costs, and it could keep them from reaching other financial goals.

+ What are the secret economic forces fueling the housing shortage? Inman’s Jim Dalyrymple II says increasingly expensive building supplies (think lumber, steel, and even paint) are driving up the cost of housing. Meanwhile, institutional investors are gobbling up to 20-30% of homes for sale, which is affecting inventory.

+ As ADUs or “granny flats” continue to grow in popularity, here are 4 hidden costs of accessory dwelling units that you should plan for.

+ Looking to sell soon? Find out the one thing you should never do to your yard before selling your house. Bonus: it’ll save you some cash!

Local News

+ Lack of crime, quality of public schools, cost of living, job opportunities, and local amenities placed 11 Denver neighborhoods among the top 25 places to live in Colorado, according to Niche.

+ Neighbors in Governors’ Park are banding together to encourage responsible growth as buildings considered landmarks are being torn down to make way for high-rise apartments.

The premium over list price is at an all-time high (think 104.1%) as more metro Denver buyers will pay whatever it takes to get under contract.

The 20 hottest real estate markets in the Denver metro area saw median home prices increase anywhere from 20% to a whopping 79% in 2020.

Financial News

+ With median gains in home values between 6% and 11% among metro counties, Front Range homeowners can expect to see an increase in their tax bills.

Mortgage rates remain under 3%, but could become more volatile in the months to come.

Biden’s proposed tax hikes could be a ‘double-edged sword’ for real estate — what homeowners and investors need to know that could reduce returns on certain property sales.

Have questions about what’s happening in real estate in your neighborhood? Let’s chat!

3 alternative routes to selling before you buy

Feel stuck in your current home? If you are under the impression that you need to sell and move out of it before you buy a new one, think again! You’re not alone in that impression, but the reality is that selling and moving out before you buy is not always necessary. Looking for an alternative route? Read on for three options to consider that may help you succeed with your next home purchase.

1. Sell after you buy your new home

This isn’t your average uber-expensive bridge loan that only wealthy folks can afford. There are several new home loan products out there that specialize in this niche home lending area. We’ve partnered up with one of the best new out-of-the-box-thinking lenders to help our clients buy before they sell. The “elevator pitch” for the Knock Home Swap? It allows you to buy a new home before you even list your current one for sale. Knock will provide up to a 20% down payment on your new home, six months of mortgage payments on your old home, and up to $25,000 to get your old home looking its best before it hits the market! Take a minute (86 seconds to be exact) and watch our quick video explaining the program. Have additional questions? Any of our brokers can help! We’re all Knock certified.

2. Don’t sell, and convert your current home into an investment property

Curious about investing? Why not buy a new home and own an investment property! The good news is that you’ve already got the latter. Most lenders will allow you to convert your current residence into an investment/rental property, provided the following criteria can be met:

  • A lease signed by the future tenant who will occupy the home shortly after your new home is purchased.
  • A security deposit from your new tenant, safely deposited into your bank account.
  • A small cash reserve in an account owned by you. This amount varies between lenders, from 2 to 6 months of the investment property’s mortgage payment.
  • Cash for your new home’s down payment.

Once these criteria are met, the debt magically disappears from your debt to income ratio and you qualify for the new purchase! The best part? Your new investment property keeps the same principal and interest payment you had when you lived there, you don’t have to refinance! This is a great way to diversify your retirement portfolio, generate passive income, and increase your net worth.

3. Sell before you buy, but continue living there while you search

If options one and two aren’t going to work for you, then number three has got you covered! Almost everyone who owns a home in Denver knows that it is a very competitive seller’s market right now.We all know if you submit an offer with a contingency to sell your current home, it immediately goes to the bottom of the offer pile. As part of your negotiation strategy, you should definitely employ a Post-Closing Occupancy Agreement, aka seller’s rent back. This agreement means that after you sell your current home, you become a tenant in it and you should have 60 days (or longer, depending on skillful your broker is) to find your replacement home, hopefully at no cost. If you go this route, you’ll need some tips for successfully finding and purchasing a new home in under 60 days:

  • Be aggressive. See homes as soon as they hit the market and make sure you are getting your new listings from the most reliable and up to date source.
  • Commit to one lender who will provide you a competitive rate (not the lowest) and who will be available during your search. I can’t say this enough: if the lender doesn’t give you their cell phone, don’t use them!
  • Get pre-approved! And submit all requested documentation to your lender. And yes, there is a difference between pre-approval and pre-qualification.
  • Review all of the purchase contracts and ask your questions before starting your search.
  • Research and discuss the hot market strategies with your broker before starting your search.
In conclusion…

Listing brokers who pitch their services have one goal: for you to sign that listing agreement. Remember, that isn’t always the best option for you! The current housing market can be a stressful realm for buyers, and careful consideration should be made before making a plan. Have conversations with your tax advisor, financial planner, lender, and real estate professional so that you make the best decision for you, not for a listing agent.

Denver housing market up 18.8% since January

Interest rates are back above 3% again, and the Denver housing market didn’t even notice! In fact, the bidding wars that everyone keeps talking about (which are real) have pushed the median sale price for single family homes past 600K, a record high for Denver and an 18.8% increase since January. Inventory, typically measured in months, was down to 1.06 months in March. There is so much pent-up buyer demand that I believe we’ll soon be measuring it by weeks. This is going to be another fast-paced, multiple-offer summer unless we start seeing a large number of listings hitting the market soon.

Want more detailed information about the market in your neighborhood? Please reach out!

Rates and prices are rising, but homes can still be found (for those prepared to battle)

Looking for a quick digest of what’s happening in real estate right now? We’ve got you covered:

National News

+ Critics slam the Fed as home prices rise 11.2% in January over the previous year — the largest annual gain in nearly 15 years.

+ “The housing market continues to face both tailwinds and headwinds,” says Nancy Vanden Houten, lead economist at Oxford Economics. “Pent-up demand and a strong economic rebound should support sales as we head into the heart of the spring home selling season. However, tight inventories and home prices at multi-year highs will make homebuying difficult for some households.”

+ Most homes aren’t ready for “aging in place,” but Liz Weston of Nerdwallet offers steps you can take now to make your home better for retirement.

Local News

+ A study finds that people didn’t abandon urban neighborhoods during the pandemic. Denver was among the most expensive large metro areas that saw a big decrease in urban in-migration and a small increase in urban out-migration during the pandemic.

+ Only 21% of Denver renters can afford a typical monthly mortgage payment ($2,376/month), compared to 27.4% nationwide, according to Zillow.

+ Denver homebuyers continue to have to move quickly and prepare for a bidding war as the housing market remains ultra-competitive.

Financial News

+ Mortgage rates remain historically low at 3.18% as of April 1st. However, the upward trend in rates may be a reason that homebuyer demand has dropped from 25% above pre-COVID levels at the start of 2021, to 8% above pre-COVID levels today.

+ The increase in mortgage rates from the beginning of the year is adding an average of $93 per month to homebuyers’ mortgage payments — roughly $1,100 per year.

How to support the victims of the Boulder shooting

Our hearts are broken for our neighbors in Boulder. Below, you’ll find assistance funds for the victims of the King Soopers shooting. By securely donating, you can support the immediate and long-term needs of those affected by Monday’s tragedy.

We’ve also included planned vigils in the area if you wish to mourn alongside the Boulder community. We encourage you to keep Boulder in your hearts and minds in the weeks to come.

Monetary Donations

+ The Colorado Healing Fund provides a secure way to donate to victims of these tragedies. They work with victim service partners to identify victim needs and fill the gaps in financial resources.

+ Donate to the Boulder County Injured & Fallen Officer Fund to extend support to the family of law enforcement members who are seriously injured or killed in the line-of-duty, including Boulder Police Officer Eric Talley, who lost his life on Monday, leaving behind his wife and seven children.

+ Community Foundation Boulder County has established a fund to support the victims, their families, and the Boulder community in dealing with and processing Monday’s events. The Boulder County Crisis Fund will support the needs of those directly affected and the needs of the Boulder community to heal from this.

+ The Elevations Foundation/Elevations Credit Union Victims’ Assistance Fund is run by Elevations Credit Union. Until April 6, the foundation and the credit union are matching donations to the fund up to $100,000 each, for a total of $200,000. 100% of the proceeds will go to support victims and their families.

Boulder Vigils

+ The Boulder Strong Candlelight Vigil will be held at 6:30 PM tonight, March 25th, at Fairview High School. Led by Moms Demand Action, the vigil seeks to remember the 10 lives that were lost on March 22nd. Social distancing and masks are required; drivers are asked to remain in their car.

Many vigils were held on Wednesday, March 24th, and more may be scheduled throughout the coming weeks. The Denver Channel is updating their website as vigils and memorials are added.

May this be a time when we remind one another of the beauty of community and the importance of sharing love and hope with our neighbors.

How the -bleep- to buy a home in Denver today

If you are buying a home in Denver right now, you already know how tough the competition is. In fact, most buyers have to submit several offers before they finally get one accepted. We’ve been talking (a lot) about our ridiculously low inventory, the increasing home prices, and the speed at which homes sell. It can be discouraging to say the least, but what’s really happening out there? We dove into February’s closings and here’s what we found out.

Median Original List vs. Close Price

We broke down several price brackets to look at the median close price versus the original list price for single family homes (the original list price is the price a home is first listed at on the market before any price adjustments; the close price is what the home actually sells for). It’s not a surprise, in our current market, that every price group sold above its original list price. If you are one of the lucky ones who’s come out on top this year with a signed contract, you’re probably wishing that these median differences were all that you paid over list price! Again, I want to point out this is the median for all sales within a given price range in Denver. This means that the ridiculously overpriced home that sat on the market for eight months because the sellers didn’t want to admit reality is included in that number. If we could pull this statistic for only homes that went under contract in 7 days or less, there would likely be a huge shift upward in these numbers. Sadly, we’ve reached a limitation on the data the multiple listing service will let us pull or we’d show you!

Historical Data

We wanted to dial out our numbers to show what the last six years have looked like. We’ve been in a deep seller’s market the entire time (a.k.a. a market with less than five months of inventory) and the close-to-original-price ratio remained between 92% and 98% the entire time. Right around the start of the pandemic, the chart shows a drastic change. The most surprising takeaway is that homes priced over $1M, which typically offer buyers the most negotiating power, now happen to have the least!

How to Succeed

Like most savvy buyers, you’re probably already aware of the hot market strategies you can employ to help you successfully buy a home. They will work if you give yourself margin. This means you’ll need to leave room to escalate your offer price upward to beat out other buyers. Unfortunately, this also means you’ll need to consider looking at homes in a lower price range than your maximum budget. Developing the right “secret sauce” for your home purchase game plan is crucial to success. While the ratios we shared above reflect Denver as a whole, you’ll want to have your broker share more stats specific to the neighborhood you’re searching in. Or, you could wave the white flag of surrender and have your broker send this text to the listing agent of the house you’re trying to buy:

The choice is yours! 😂

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