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Spring 2020: A Phenomenal Time to Sell and Buy Denver Real

 

 

Most of the time, market conditions that are good for sellers are generally bad for buyers, and market conditions that are good for buyers are generally bad for sellers.  Denver is at a unique moment in time where it is actually a phenomenal time to be a Denver area home seller AND a Denver area home buyer.  

If you've been thinking about selling your home and purchasing another, now is a great time to do it.  If you're selling and moving out of state, now is a great time to do it.  And if you're a first-time home buyer, now is a great time to do it.  

Let's start with why it is a great time to buy. 

Interest rates on 30-year fixed rate mortgages just hit their lowest levels in recorded history, averaging 3.29% according to Freddie Mac.  Never has there been a time in recorded history when 30-year fixed rate mortgages have had lower interest rates.  So how does that impact you as a buyer?  In two key ways.

Low interest rates lower your monthly payment.

Let's say you are purchasing an average home in Denver County.  In February 2020, the average sale price in Denver County was $524,640.  Assuming a 20% down payment, at 3.29% your monthly principal and interest payment would be $1,836/month.  Just a year and a half ago, in November of 2018, the average 30 year fixed rate interest rate was 4.94%.  If interest rates were at the same level today as they were just 1.5 years ago, the principal/interest payment for the same loan amount would be $2,238--so at today's rate, buyers are saving $402 per month, $4,824 per year, and $144,720 over the life of the loan.  To put this in even greater context, interest rates peaked in 1981 at 18.63%.  At that interest rate, the average Denver home today would come with a monthly payment of $6,542/month--so at today's rate, you are saving $4,706 per month, $56,472 per year, and $1,694,160 over the life of the loan.

Low interest rates increase your purchasing power.

A lower interest rate means you can afford a more expensive house. Let's say you can afford to spend $2,000/month on principal and interest.  At 20% down with interest rates at 3.29%, you can afford a $571,553 house.  If interest rates were 5%, you could only afford a $465,704 house.  A small difference in interest rates means you can afford a house that is more than $100,000 more expensive.

So if it is such a great time to be a buyer, how can it be a good time to be a seller, too?  

We are currently experiencing incredibly low inventory and incredibly high buyer demand.

In February of 2010, there were 10,124 homes for sale in Denver County and 625 sales (6% of the inventory).  In February of 2020, there were only 1,893 homes for sale, and 947 sales (50% of the inventory).  Sale prices have more than doubled in the last 10 years in Denver County, with the average sale price in February of 2020 being 116% higher at $524,640 than it was in 2010 at $242,915.  Median days on market in February of 2010 was 56, and in February of 2020 it was just 12.  In other words, homes are selling in one fifth of the time this year than they were ten years ago.

Seasonal demand has shifted.

When there is low inventory and high buyer demand, multiple offer situations, or "bidding wars," often occur.  Over the last 6-7 years, bidding wars have been most common in Denver in March-June.  This year, we started seeing them in January.  In 2019 the market was very hot for the first half of the year and cooler for the second half of the year.  Peak sale prices occurred in May (meaning many of the homes sold then were listed in April), whereas ordinarily peak sale prices occur in June or July.  In 2020, we saw the market heat up even earlier than last year, with the frequency of bidding wars that are happening now suggesting that the peak selling season for the year may be happening right now.  

So where is the market going? 

While nobody has a crystal ball, more people are still moving to Denver than are leaving it, not enough homes are being built for all of the people that are moving here, and our local economy is incredibly strong (Colorado has the 5th lowest unemployment rate of any state in the country, and the Denver metro area is in the 9th percentile for unemployment as compared to cities across the country).  Denver does not seem to be in a bubble, and these fundamental factors should go a long way toward supporting home values for the foreseeable future, barring something calamitous happening to the national or local calamity. 

The national and global economy are the biggest question marks relating to local real estate values, though.  We are now living in a global world, and there is a lot of national and global uncertainty.  We have a highly unpredictable President.  The impact of the coronavirus is not yet fully realized.  This is an election year.  A lot can happen in the next six months and over the next six years.  

While we can't know what the future will bring, we do know what the present is telling us: it is currently a phenomenal time to be a Denver home seller and/or buyer.  The buyers, sellers, and investors who will benefit most from this local market are those who have a team of experts like the Schlichter Team working on their behalf.  We joined Compass after becoming the #1 producing group at the #1 producing brokerage in Denver, have been the #1 ranked real estate team (or among the top few) in Denver as ranked by users of Yelp.com since 2012, and were recently awarded the 2019 Titanium Award from the Denver Metro Association of Realtors.  

Contact us today to get the ball rolling on your home search and/or sale.




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