For the past eight years, the Denver housing market has been on fire. Denver home prices surged and as of August 2020 hit historic highs. According to the Denver Metro Association of Realtors, the average price of a single-family home in the Denver Metro area rose to $606,330 in August. This proves that not even a global pandemic combined with an election year can slow down Denver’s home prices from continuing to rise.
Why the Surge in Denver Home Prices?
Denver has been the mecca for sellers since 2012. Single-family homes correctly priced under $500,000 could expect to see multiple offers over a weekend and likely go under contract for above the asking price.
During 2020, the number of homes on the market drastically decreased. In February 2020, the United States was technically in a recession and throw in a global pandemic. And suddenly even fewer homeowners are putting their homes on the market. Also, the Fed lowered mortgage rates, causing a surge of refinancing and purchases.
Home prices in Denver are up also because of the simple relationship between supply and demand. There aren’t enough homes for buyers in the market. Months’ of supply of inventory is a way to determine if a housing market is a buyers’ or a sellers’ market. Currently, there is 0.5 months’ supply of inventory for homes under $500,000. That means that if sellers stopped putting their homes on the market today, in two weeks there would be zero homes on the market.
Also, it means that the Denver housing market has 0.5 houses per buyer in the market for a home under $500,000. That’s right, there is not even one house per buyer in the Denver market.
A balanced market is a term used to describe whether or not supply is meeting demand. Balanced markets have 6 months of inventory. And a buyers’ market is when months’ supply of inventory surpasses 6 months. Economists are predicting that we should see a rise in inventory. The showing statistics are revealing that buyers are pulling out of the market as we head into the fourth quarter of 2020. For the past two weeks, showings have gone down 20%. If you got scared off by the crazy bidding wars before, now may be your time.
Home Price Matters
The asking price for the home has to be right in order to get the most exposure. When a home is overpriced, typically it will sit on the market. When a home sits on the market, especially in a sellers’ market, it triggers a response in buyers to wonder what is wrong with the home.
The market will determine the value of a home. If a seller wants top dollar, the common strategy is to price the home fairly and let the market (buyers) bid it up. Otherwise, a home will sit and become stale. Denver is not a housing market where buyers feel confident coming in with a lower offer. So buyers inevitably wait for a price reduction.
When a property is priced at fair market value buyers can still expect to have to bring their A-game when it comes to submitting an offer. This includes the following: offering above asking, waiving the right to ask the seller to make any repairs, offering to bring more cash if the home doesn’t appraise, and post-closing rent-backs to the seller at no cost to the seller.
The Bottom Line
All of the statistics are showing that the Denver housing market is not going to slow down any time soon. Due to the popularity of the Denver metro area and lack of housing inventory for people who want to purchase a home, the home prices and values will continue to rise overall. So, it would be smart to get into the game before the Denver market prices you out.