What’s New in the Real Estate Market?
As we recently reported, the real estate market is starting to normalize from the pandemic highs we saw over the past couple of years. Most notably, housing inventory was up considerably in July. There were almost 8,000 homes for sale at the end of the month. This represents a 31.7% spike in inventory from the previous year. This inventory jump is in large part due to the recent increase in interest rates we saw over the past few months, as the Federal Reserve tries to control 30-year-high inflation.
Mortgage interest rates peaked at 5.81% at the end of June – the highest they have been since 2008. This priced many buyers out of the market and made some decide that they did not want to pay the now-even-higher price tag for homes. Others are still waiting, in hopes that interest rates will go back down to historic lows. Many hope that home prices will decline as they did during the Great Recession. Given the current supply & demand imbalance in Denver and across the nation, it’s not likely that home prices will decline. Rather, we expect prices to keep rising at a more gradual pace over the next year.
Interest rates went down at the start of the month to 4.99%. This was the lowest they had been since April. However, they went back up to 5.22% a week later. What does all this fluctuation mean for you? It means you should stop trying to time the market! If this is the right time in your life for you to move, you find a place you like, and you can afford the monthly payments, go for it! If you are hoping for some magical shift in the market that makes homes more affordable, all economic signs point to no. It’s more likely that Denver will continue to show home appreciation year-over-year, as it has 47 out of the past 50 years. If rates do go down drastically, you can always refinance. Or if rates climb even higher, you’ll be glad you locked in your current rate. Either way, don’t let rates alone be the reason you stay put if other factors are in alignment with a move.
Info for Sellers
One of the biggest mistakes you can make as a seller is pricing your home too high. That typically leads to fewer showings, fewer offers, and could ultimately result in an unnecessary price reduction to get the deal done. If your home sits on the market too long, buyers may think that there’s something wrong with the property (even if there isn’t), which inevitably leads to you accepting less money than you could have if you had priced your home accurately. 10 or 15% premiums on houses were the outliers over the past couple of years, and they made great headlines for reporters. The current average home premium was 5-6% on average this spring but has fallen to a 1% premium recently. Although you still have more negotiation power than buyers right now since inventory is still on the low side, don’t make the mistake of getting greedy! The market is cooling, so you will most likely be the one to pay the price.
Info for Buyers
Although this is still not considered a buyer’s market, buyers who can afford to purchase a home should have an easier time finding a place for sale. Due to the increased inventory, properties are also sitting on the market longer than they were during this time last year. There are also far fewer home showings per property. These extended days on market can prove valuable to score a deal on a home. Particularly if a property has been sitting for 30-45 days, there should be slightly more room for negotiation than there was this time last year. However, be sure to temper your expectations. Sellers still hold the cards as long as there are so few homes for sale. We are still ~7,000 homes shy of the mark we would need before we would be considered in a balanced market!
*We use reasonable efforts to include accurate and up-to-date information. The real estate market changes often. We make no guarantees of future real estate performance and assume no liability for any errors or omissions in the content.
As always, feel free to contact us if you have questions or are interested in making a move.