As we wrap up this turbulent year, there are still so many uncertainties in the world. One thing remains unshakably clear in Colorado, there is no shortage of upward movement in the local real estate market this year. To close out this year in newsletter, here’s a quick summary of what’s happening and what we expect in the three general price sectors – entry-level, mid-range, and luxury, as well as our monthly tips for Buyers & Sellers. We’ve also included a downloadable Home prep Checklist to prepare your home for sale!
Persistent Low Inventory in Entry-Level and Mid-Range Market
Entry level homes between $300K-$500K did not see much material change in number of homes sold this year. Despite this fact, people were still consistently buying homes through the economic uncertainty of the pandemic. This remains a positive signal for the strength of the local market. However, as stated in some of our previous publications, the $500K- $900K price range truly led the recovery after the initial shutdown this spring. Flocks of people cashed in on low interest rates and high equity, trading up into that higher price range. The demand for their entry level homes was sky-high and there was plenty of mid-range inventory to choose from. Who wouldn’t take advantage of that situation if given the opportunity?
An Unexpected Luxury Boom
Somewhat unexpected, based on data from earlier in 2020, is that luxury home sales (homes over $1MM) saw an increase of 115% over the past year in the Denver metro area. It could be that many people who were planning to buy into the luxury market over the next few years saw that interest rates were exceptionally cheap for mortgages and Jumbo mortgages. This may have prompted them to advance their plans and get deals done sooner. Since so many luxury deals happened in 3Q of this year, next year may see a drop in luxury home sales. This means that the 12% increase in the year-over-year average sales price, seen in 3Q20, will also drop dramatically. There may even be a shift into a negative price appreciation for several months.
To some, this will be in stark contrast to the strength of 2020 price gains. Compare this year’s 12% y.o.y. avg. price gain to the 6% historical average! This year seems to have seen twice as much appreciation as the norm. When these averages abruptly reverse it might seem like the market is tanking and Denver homes are devaluing.
What will most likely have happened is:
A) The mix of homes available in 2020 was skewed with far more in the upper price points due to a serious lack of entry-level inventory. The mix of inventory is expected to move towards lower priced homes in 2021, which will affect the data. More of those homes are expected to come on the market due to delays from COVID this year.
B) So many luxury sales happened on the back end of 2020 that there will be less luxury deals to be made in 2021. This will lower the average price but will not necessarily mean that everyone’s homes are devaluing.
Despite any sensational headlines you may see about home prices, real estate activity will most likely just be shifting towards the lower end of the market in 2021. This is still a hot market, and that is unlikely to change based on the past decade of strong real estate sales growth.
Tips for Buyers
Narrow Down the Search to Get Started
One method that is extremely effective for narrowing down your house hunt is “The Search Funnel.” A major struggle Buyers face when beginning to look through homes online is that there is almost too much to consider. Depending on your price point, criteria, and desired location, there are literally thousands of possibilities. It’s best to start with what matters the most to you. Focus on your criteria for a home based on your non-negotiables and adjust from there based on what’s available in your budget. It is generally recommended to start your house hunt with your top three homes. Be wary of trying to see too many homes at once – you may start to get overwhelmed and it might leave you in a tizzy, not sure which house was which. Keeping the showings per day down and focusing on a few homes at a time will help us learn a lot about your likes and dislikes, and how to continue the hunt. Once you hone in on what you’re looking for, you’ll be able to pinpoint what’s right for you and jump on any contenders. To emphasize, adjust these recommendations based on your unique situation. If your budget is tight, you may be able to only get a few of your top wants. If that’s the case, focus on the non-negotiables and whether the issue can be solved with time or money. For example, if the kitchen is outdated, down the road you will be able to upgrade it. However, if you can’t bear the thought of living close to a highway, move on – you’ll never be able to move the home, although, you can always sell it! 😉
Tips for Sellers
So Many Steps… How to Prepare Your Home
Aside from any major renovations or planned upgrades to your home, there is a lot to consider getting your home up-to-par for successful showings. We recently compiled a checklist that can help you get going on the road to a quick home sale. Many homes sit on the market for longer than they need to, sometimes because of avoidable reasons. Maybe you forgot to clean a crucial area of your home or have hidden your clutter away in a not-so-hidden place. Follow the link below for an interactive checklist that can help you get your home ready for Buyer eyes.