The Metro Denver housing market is expected to outperform the nation in home value growth and is predicted to be the 5th hottest housing market in 2021 – preceded only by Austin, Phoenix, Nashville and Tampa. A panel of economists and real estate experts in Zillow’s Q4 2020 Home Price Expectations Survey (1) considers Denver and these other cities to be “migration magnets” due to their somewhat affordable, family-sized homes, thriving economies and sunny climates.
What’s Driving the Denver Housing Market?
- Low Interest Rates: Ultra low mortgage rates are significantly decreasing the cost of borrowing. In his 2021 Housing & Interest Rate Outlook (2), Barry Habib explains that while mortgage rates may bump a bit higher due to spending under the new administration, we will see rates come down because of the debt and technology reducing inflationary pressures.
- The Pandemic: The coronavirus has changed the landscape of the work environment with increasing numbers of people that telework. People working from home are finding they want more space especially as teleworking is a trend that is expected to continue even after the pandemic is a thing of the past. Additionally, teleworking is more popular in Denver than in other parts of the country, so Denver continues to draw new residents and has experienced a net migration during the pandemic.
- Denver’s Attractiveness: With its sunny climate and close proximity to resort areas, Denver is a popular destination. It’s one of the most popular for Millennials who make up about 30% of the area’s population. Since the median age of a first-time home buyer is 33 years old, This is significant because they represent the largest group of homebuyers.
- Low Inventory: Even prior to the pandemic supply had been extremely tight. In fact, building been behind since the great recession of ’08. Current inventory in the Denver housing market continues to drop. DMAR’s February Market Trends Report shows that housing inventory remains at record lows. January ended with 2,316 active listings, down a whopping 53.13 percent from January 2020.
Navigating the Denver Housing Market
Real estate may typically be about location, location, location, but in this Denver housing market it’s mostly about patience, patience, patience. If you’re selling, it’s a quick sprint to the finish line. However, if you’re buying, prepare yourself for a marathon because in this market cash is king and multiple offers are the norm. Here’s a description of Denver’s market from the Chair of the Denver Metro Association of Realtors:
“What does the typical listing look like for a buyer? A house hits the market on Thursday, and showings start on Friday. The seller takes offers through Sunday with a Monday deadline and navigates though the multiple offers and different terms, choosing one contract while disappointing several others.” Andrew Abrams, Chair of DMAR Market Trends Committee.(3)
While entering today’s competitive housing market can be challenging, there are a number of strategies you can use to get a leg up on the competition.
- Become a Churchill Certified Home Buyer: At the very least, you’ll need to be pre-approved for your home loan. The better route is Churchill’s Certified Home Buyer Program – it’s the next best thing to paying cash for a home.
- Choose an Experienced Agent: You want to hire an agent that is a skilled negotiator and has experience with a seller’s market so they can help you navigate this competitive Denver housing market.
- Have the Right Expectations & Mindset: Talk to your real estate professional about the process, being outbid, multiple offers, appraisal gaps and more.
- Find Compelling Comps: If you find a house that has been on the market too long, ask your agent to find comps and data and that reflect realistic pricing and then present this to overpriced sellers.
- Explore Withdrawn & Expired Listings: You might find sellers who have dropped out of the market recently that may reconsider selling their home.
- Look at New Construction: In these new neighborhoods your dollar may go further than with a resale. Keep in mind, builders are reporting labor shortages(4), so expect a longer wait time to get into a new home.
- Consider Attached Properties: They tend to have slightly more inventory and are selling at a slower pace than detached properties.
- CAREFULLY Consider Waving Contingencies: Many buyers are considering waiving contingencies like appraisals and inspections. A word of warning… Before considering any of these strategies, have your agent educate you on the risks and the best strategies for this. Additionally, read next week’s article on the appraisal gap to learn more about these contingencies and the risks they carry.
The Bottom Line
While the increased demand for homes and record low mortgage rates will continue to keep the pressure on the housing market, it is still a good time to buy. Interest rates will remain favorable home appreciation is expected to be 6% nationwide(2) in 2021. Becoming a Certified Home Buyer, working with a trusted agent and taking advantage of our other tips will help you get a leg up in the Denver housing market!