Real Estate Bubble

U.S. Real Estate News Recap: June 2021

Here’s a quick digest of what happened in U.S. real estate last month:

+ Moody’s chief economist believes the real estate market is topping out, but that it doesn’t mean housing prices are about to take a free fall anytime soon.

+ Local courts across the country could see an influx of eviction cases when the eviction moratorium ends on July 31st. What comes next for renters and landlords will largely depend on how states and municipalities manage this potential influx.

+ Historically high lumber prices take a dive as Americans start to go on vacation instead of renovate and supply starts catching up to demand.


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U.S. Real Estate News Recap: May 2021

Here’s a quick digest of what happened in U.S. real estate last month:

+ 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.

 

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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.

Denver Real Estate News Recap: January 2021

Here’s a quick digest of what happened in Denver real estate last month:

+ 56% of economists think the Denver housing market will outperform the national average this year, hoisting our city to one of the top five hottest markets for 2021.

+ Some local economists believe the Denver housing market is running out of gas. They said, “while new home sales should match the pace of 2020, existing-home sales this year will fall and price increases in the months ahead will be more subdued.”

+ Our opinion? 2021 is likely going to be a fast-paced, appreciating market on all fronts.

+ Denver is the third hottest market for millennial homebuyers, ranking behind only San Jose and Boston. A whopping 59% of all Denver-area homebuyers in 2020 were from Gen Y.

 

 

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Is Denver’s Housing Market Failing? New Report Says It’s Very Close.

Source: Aldo Svaldi of The Denver Post

Is Denver's Housing Market Failing?

$80,000. That’s the estimated amount that potential buyers need to make if they want to buy the median priced home in Denver. And that price in Denver is now at $425k ($395K for attached homes and $455K for detached), which corresponds to a 20% down payment of $79-91K. For now, Denver’s median family income is right above $80k. Can incomes keep pace with soaring real estate prices?

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