No question about the overall Denver real estate market. It’s on fire! Home prices are escalating at a frantic rate. Buyers are competing with multiple offers. As a result, many Denver home sellers get more than the asking price.
Savvy Denver Realtors have been waiting for the number of homes on the market to start to increase as Spring approaches. Because, this is a great market for Sellers but not so much for Buyers or Realtors. It’s hard to buy when facing competition from multiple offers that can sometimes 20-30 offers for homes priced under $400,000.
Luxury Denver Real Estate
Even luxury Denver homes have been selling with multiple offers. The number of luxury homes for sale have leveled off. Although, usually fewer buyers are competing for homes priced above $1.5m. As a result, even potential luxury home sellers have been reluctant to sell. One client recently told me “Why should I sell now? I am making more money every month I hold off selling than I make in my profession”.
Ok. Overall, home prices appreciated more than 1% per month in the last 12 months. One article in the Denver Post recently touted that the average Denver homeowner enjoyed $34,0000 of annual appreciation. Of course, luxury real estate owners enjoyed much more appreciation. Maybe, some Sellers are holding out for that rate of appreciation to continue. But, how long can it last?
I have been selling homes in this Denver real estate market since 1978. I have seen the cycles that pose serious home seller risks. Ups and and downs. Usually, the swings in Denver real estate are wide, and sudden. For example, the stock market and mortgage security crash in 2007-2009 precipitated a crisis in real estate. Some segments of the Denver real estate market declined 50% in a couple of short years. Savvy investors were able to buy small homes in out of the way neighborhoods for pennies on the dollar.
Wild Swings In Denver Real Estate Market
Even our market market drop in the 1980’s was severe. I remember wondering how low could the market go when it seemed that every energy company was pulling out of Denver. Jobs were disappearing and tons of “For Sale” sign replaced those jobs. It was an ugly time to sell a home. I remember writing my real estate newsletter at the time. “Hold on to you home if you possibly can. This is NOT the time to sell.” The early 1980s was another time of Denver home seller risk.
But, can that day come again? Is this market boom different? For sure. In some ways. Denver has a more diversified economy. We are not totally dependent on oil and energy. And, many new corporations have moved here or have regional headquarters here. So, we might have some degree of protection to a downtown in the real estate market. But, we are not isolated from everything.
Risks to Denver Real Estate Prices
Let’s consider the risks. Number one is inflation and resulting rising interest rates. As the prices of goods and services rush to catch up with real estate real estate prices, interest rates usually rise as inflation rises. I also remember the hyperinflation and 18% mortgage rates of the 1980’s.
Interest rates have already risen about 5/8% in the last four weeks. If those rates continue to rise, we could see 4% or even 5% mortgage rates this year or next. If that happens, loan qualifications for home buyers with get tighter. Many will only qualify for a lower loan amount. In turn, homes prices could dip significantly in some market segments.
Threats to single family zoning laws could also hurt home values especially in luxury home neighborhoods. Group homes have already been approved in all Denver neighborhoods including Denver neighborhoods previously zoned for single family residences. Some politicians want to further “democratize the suburbs”. No one fully understands yet what that might mean. But, zoning laws that limit density even in suburban HOA communities could certainly become a target.
All of this could take months or even years to come about. But, the risks are there.
Talk To An Expert Realtor Early
If you are even considering selling a home, this is the best time to talk to expert Realtor to start to develop a selling strategy that is best for you and your time table. We at The Hotz Group are happy to help without any cost or obligation of any kind. Just use this form so we can be touch to begin a conversation. We’d love to hear from you.