A Metro Denver Real Estate Company
The 10-year Treasury note dropped below 3% on June 30. The average mortgage interest tends to post at 2.20% higher than the 10-year note, so today Fannie and Freddie rates at 5.7% is an indicator that the mortgage market is pricing in the expected Federal Reserve’s increase of 50 basis points later in July. If that is true, mortgage rates may settle at 6% or less as we move into the fall.
The Denver Metro Market is showing a steady increase in inventory, which is resulting in buyers feeling less pressure to make snap decisions. Sellers cannot expect 3 day sales, competing offers, and sale prices over asking prices. It is still very much a sellers’ market, but the velocity of the market has slowed rapidly.
Having additional options can make the search for your next home easier. But inventory is still low overall, which means your house should still stand out when you sell.
If your biggest question is where you’ll go if you sell, take this as encouraging news. Let’s connect to start the process today.
As the market begins to show an increase in available inventory, it’s important for everyone to recognize that in a “normal” market, houses sell because they are:
Priced right.
Meaning comparable sales need to be 60 days or less, preferably 30, & sellers cannot “reach” thinking they can squeeze another $10,000 out of the large pool of buyers. The buyer pool is very nervous, & with interest rates exceeding 6%, consumers will need time to adjust to the rapidly increasing mortgage rates.
Showplace Pretty
Home sellers must prepare their homes to look better than the competition, & accede to at least some of the buyers’ demands after inspection.
The overall market will be fine, as there are more buyers than sellers, but how we prepare our clients for the buy or sell must include a discussion of expectations.
As recently as June 2019, after just three long Pandemic-filled years, the Metro Denver residential inventory was 30,000 units, slightly increasing until September of that year and receding until February of 2022 when the cumulative monthly inventory stood at 9,004. The graph demonstrates the sharp decline, with the expected increase in the spring. How does a vibrant market like Denver experience that kind of drop in market vitality?
1. A presidential election. No matter the outcome, half of the country was going to be emotionally distressed, egged on by a media that makes money in reporting or creating negative information. This distress shows in a population that is often fearful to sell their present residence.
2. A Pandemic. Starting in March of 2020, the United States, along with the rest of the World, began the long, slow slide into a Pandemic economy. While available inventory was reasonable in the spring of 2020, the drop was perceptible as people continued to respond to the effects of the health crises. People that could buy a home did so, creating panic buying, while many homeowners became very cautious in protecting what they had.
3. Inflation. For the first time in many years, American citizens began to feel the effect of increasing prices and, as we moved into 2022, sharply increasing interest rates. Only now are we seeing inventory increase as home buyers are becoming skittish in response to rising mortgage rates.
4. A raging war in Europe. The United States has increasingly become engaged in a proxy war with Russia, supplying Ukraine with both lethal and non-lethal material to defend against Russian aggression. While the war seems a long way off, some people are beginning to get nervous about the possible impact on or to the United States.
5. The combination of the above, along with various regional and employment stability issues, have served to reverse the buying spree that was evident during the height of the Pandemic. It is uncertain today if the rise in inventory is the result of normal spring increases, or portends a more serious reversal in the home sector.
Source of Graph: REcolorado
With much of the recent Industrial Construction occurring in Adams County, residential areas on Metro Denver’s far east side and the I-76 corridor are progressing at a rapid rate. Water supplies secured by Aurora support large-scale developments such as Painted Prairie, Aurora Highlands, and Sky Ranch. With close proximity to Denver’s International Airport and the E-470 Toll road, residents in those areas can expect to see property values continue to appreciate at a steady, if not aggressive rate as the housing economy adjusts from the pandemic years.
As seen in the graph, foreclosures are not a national financial problem. That said, new data from the Harris Poll shows that 84% of Americans plan to cut back on spending as a result of price spikes. More than 70% of respondents said they’re feeling the effects of inflation the most in gas prices and groceries.
The Denver area market showed very strong sold/closed statistics in April of 2022. The slowest market in the extreme southwest Metro Denver area zip code of 80135 showed 11.92 weeks of inventory, at an average sold price of $2,465,375, while the most aggressive was the Lowry area zip code of 80230, averaging $1,588,571 with no standing inventory.
Out on the limb prediction: May closings will show a slight slowdown, as the pace of pending contracts slowed in April.
The external factors of higher interest rates, strong inflationary issues in the fuel and agricultural sectors, and the uncertainties stemming from the Russia/Ukraine war will act to slow the housing market. But be aware that slow does not mean stop. The population demographics that are pushing the market have not changed, and will not until late in this decade. We simply have more needs than available products.
Out on the limb prediction: The housing market will begin to level, with slight increases and decreases on a month-to-month basis. Prices will stabilize over the balance of 2022. The predictions from economists and the many market observers offer a wide swing in predictions regarding interest rates, inventory, builder starts, and any other overall market segment remotely related to or dependent on the housing market. As one of the observers, I am taking the conservative middle ground based on the overall need for housing by the expanding Metro Denver population, at least for the remainder of 2022.
Aim for Open-Ended Questions – At Novella, we ask questions that will help us and you better understand your lifestyle and how the house fits into that.
Buyers must be Pre-Approved – This means the loan is ready to go subject to an address. Credit is approved, employment & income verified and the application is complete.
Complete a “Right to Buy Listing Contract” – It has become increasingly important to create a contractual relationship with buyers so they have representation in the increasingly competitive environment.
Novella Real Estate
5600 S. Quebec St., #150D
Greenwood Village, CO 80111
(303)350-5838
