Useful information on buying or selling a home in the Denver market.
“I cannot recommend Tracy highly enough!! I had just moved to Denver and Tracy worked so hard to find a house for me, guide me through the buying process and negotiate on my behalf with the sellers. Tracy is professional, tireless and super conscientious. She never forgets the smallest detail. She also has a great sense of humour! I would not hesitate to recommend Tracy….5+ stars all around!!” – Bonnie King
Wonder why your home didn’t sell in a weekend? Here’s a bit of info on the summer real estate market. If you take a look at the graph you’ll see that showing traffic in 2Q 2016 is down quite a bit from the First Quarter of the year. This is no surprise, it’s been the seasonal trend for the last four years. Coming off of a super-heated real estate market this spring, the usual summer “slowdown” feels more dramatic than a political convention. If you’re “lingering” on the market for a whopping two weeks remember that listings don’t always sell in a weekend and not all of them get twenty offers, especially those priced over $350,000. Summer in Denver is not only the real estate selling season, it’s vacation time too! With so much to do in our lovely state, we get up, get out and go more often and our stressed out home buyers need a break. Showings tend to pick up again after the Fourth of July for those looking to make a move and settle in before school starts in late August. That’s the conventional wisdom coming from an unconventional gal.
What I have seen year-after-year is a strong autumn season for real estate sales when the summer buyers have either completed or delayed their purchase and those who want to serve Thanksgiving in a new home come out to play. Same goes for the end of the year when myth tells us it’s a bad time to list a house for sale. My experience has been that winter buyers are fewer, yes, but they are more serious and with our continued lack of inventory many will see the cooler months as a less competitive time to purchase a home. Look for more soon in my next Real Estate Market Update.
The last seven years have seen a surge in the metro Denver real estate market as record numbers of buyers look for homes, which in turn has caused prices to jump. The strength in the market has been so pronounced that people are beginning to ask “Are we in another bubble?” It’s a reasonable question given the horrendous experience of the housing crisis, and while no one can ever predict the future with certainty, I see no evidence that we’re heading for a dramatic downturn in the real estate market any time soon. Here’s why:
1. Even with the continued increase in metro Denver home prices (up another 8 percent in the past 12 months) the average inflation adjusted PITI (Principle, Interest, Taxes, and Insurance) payment made in metro Denver is actually BELOW our 35-year average. This means that while prices have steadily risen, buyers are still able to afford their monthly payments, providing plenty of room for continued home price increases.
2. The number of transactions relative to the population of metro Denver is just about at the 25-year average. At the peak of the bubble in 2006 the number of home sales was about 20 percent above the historical average. When we see the number of closed transactions well above our historical average that’s an indication of an overheated market, as it was in 2006. The number of closed home sales is actually DOWN 12 percent in the past year due to the low inventory. No sign of a bubble here.
3. In 2006, many of the deals were closed with low or no documentation mortgages (“liar loans” or “no doc loans”). Today, mortgage underwriting standards are among the toughest they’ve been in decades. This prevents unqualified buyers from purchasing property, which mitigates the chance of the market overheating (fewer buyers means fewer purchases means less chance of the market frothing into bubble territory like it did in the past).
4. Because of relatively high home affordability it’s a lot cheaper to buy than rent in our market. This would not be true in a bubble. For housing price affordability to return to the average level that we saw in the years between 2000 and 2004 either home prices would have to increase an additional 35 percent or interest rates rise to 6.6 percent. Neither is going to happen any time soon.
5. The imbalance between buyers and sellers we’ve seen recently in our housing market (too many buyers/not enough homes for sale) is due to a lack of inventory, not illogical/unrealistic/unsustainable demand from buyers. “Much of the price increases we are seeing are the result of rising demand among investors and homebuyers for a still-limited supply of homes for sale,” said Anand Nallathambi, president and CEO of CoreLogic. This imbalance is a logical correction from years past when we had too FEW buyers in the market. This is how markets are supposed to work, always regressing to the mean over time.
6. Rising mortgage rates will help to temper the possibility of a bubble as well (they are still near 50-year lows but are expected to rise someday). “History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume,” wrote Mark Palim in a Fannie Mae commentary. So the positive side of a rise in mortgage rates is that it will reduce the number of buyers and therefore lower the chance the market will rise out of control and end up collapsing in a bubble.
Click on the monthly market snapshot, the inventory of metro Denver homes for sale continues to fall; it’s down another 5 percent from a year ago. Since the inventory is still extremely low (about 5,520 homes on the market where about 18,000 is a balanced market) I am all but certain the demand will still exceed the supply for the next several years and prices will continue to rise for the foreseeable future. No bubble on the horizon yet… Stay tuned!
If you agree that we’re not headed for a bubble any time soon what does this mean for you as a buyer? I think it means you should consider buying a home IF it makes sense for you to do so. Are you running out of room at home? Expecting a baby? Have an awful commute? Want to live in a nicer neighborhood? Looking for a better school district for the kids? There are a lot of great reasons to move. But don’t buy a home to speculate on the market; buy because it’s time for a new home. Call me anytime to discuss what your options are and how I can help you find a wonderful place to live.
We have been discussing the incredible strength in our housing market. If you’re looking to sell your home this should be very welcoming news! The inventory of homes on the market is at an all-time low and prices are up. Call me and I’ll be happy to run a complimentary Comparative Market Analysis on your home to let you know what it might be worth. It’s great information and costs you nothing.
The most recent “Metro Denver Area Residential Rent and Vacancy Survey” shows the great news continues for landlords. According to the report:
“The overall vacancy rate for the metro area for the fourth quarter of 2015 was 3.1 compared to 3.9 percent for the previous quarter, and 1.5 percent for the fourth quarter of 2014. It was 2.0 percent in the fourth quarter of 2013, 1.7 percent for the fourth quarter of 2012, 2.1 percent for the fourth quarter of 2011, 2.0 for the fourth quarter of 2010, 5.5 for the fourth quarter of 2009, and 4.9 percent for the fourth quarter of 2008.”
In the U.S., more millionaires owe their wealth to real estate investments than any other single source of income. Today’s market could not be better for long-term buy –and-hold investors. Call me to find out more.
Let’s talk about homeownership. Are you considering buying vs. renting?
Renters often ask me if it’s too late to buy a house: Are we heading for a big downturn? Are we too deep in the market cycle to buy? they wonder. Timing the real estate market perfectly is extremely difficult, perhaps impossible, and some of these potential buyers were the same renters that were sitting on the fence when the market was down, even once we’d passed the nadir. I believe that buying a home is less about the market and more about life; your life. So don’t try to time the market, take a look at your life, the low interest rates and time that!
1.) Are you getting married, starting a family, or tired of paying skyrocketing rent without having an asset to show for it? Would you like to have more space; a backyard for the dog, the kids, the BBQs, or the tomatoes? Do you like the idea of being part of a neighborhood, community? Perhaps you got a nice raise, job or promotion and you’d like to set down roots, do you plan on staying in one place for at least five years? Do you like the idea of investing in something that will build long-term wealth?
These are the types of questions you should be asking when you are considering homeownership.
Here’s another thing to keep in mind. In the U.S., the average total net worth of rental households is $5,800. Compare that with the average net worth of a home-owning household at $199,500 and you’ve got worth 34 times more than those who rent! There’s no doubt that over the long term, homeownership is a solid way to build wealth and financial security. I often advise my first-time buyers to get into something affordable now (not so easy in Denver these days, but doable) and then move up when life allows. If you can keep that first property as a rental, it’s a great way to invest in your financial future.
2. Interest rates remain at record lows but this can’t last forever. No one knows when they’re going to rise, but news this week gave hints of a rise as early as June. Though home prices have gone up the past several years, low interest rates continue to make homes relatively affordable— especially compared to renting. Once interest rates rise, the door to home affordability will begin to close for a lot of potential buyers, leaving them sorry they didn’t act when interest rates were at 50-year lows.
Let me break down the numbers. Assume you are purchasing a $210,000 condo with a 5 percent down payment. The Principle + Interest payment at 4% interest would be $952 per month (tax and insurance and HOA not included). An interest rate increase of one percent (5%) would take your payment of $1,070 per month—an increase of $1,416 a year. Now assume that rates tick up to 6 percent. That increase would result in a 21 percent increase in payments from $952 to $1,196. Where you really see the effect of these increases is when you hold the property for the full 30 years. On a $210,000, 30-year fixed-rate mortgage that increases from 4 to 5 percent, the borrower who obtains the 5 percent loan would pay an additional $42,772 in extra interest as opposed to the borrower who paid just 4 percent interest. Though most buyers consider their monthly payment as most important, when you look at the life of the loan you’re paying a lot more in the total loan amount. This is a great reason to make a “move-up” move right now. Say you’ve outgrown your place, it may be time to cash out and get your “forever home”, or like I mentioned, use your current home as an income property and let your renters pay off your mortgage.
The main reason the average home owner has so much more personal wealth than the average renter is that homes appreciate in value. Over the past 45 years, homes in metro Denver appreciated 6.3 percent per year. If you buy a $200,000 home, you can expect over the long term its value to rise about 6 percent every year. This means you’d make $12,000 in appreciation the first year, an additional $12,720 the second year, another $13,483 in the third year, and on and on. Contrary to popular belief, only 4 of the past 45 years did prices actually fall in metro Denver.
If you’re still wondering whether you’d be better off renting or buying, Trulia built a great Rent-vs-Buy tool. Answer a few simple questions and the system tells you whether it makes more financial sense over the next seven years to rent or purchase. I think it’s worth a couple minutes of your time to see what you can learn – you’ll really like it!
Key Messages for May
Prices are up 8% in the prior 12 months vs historical 6%. Inventories are tighter than last year, especially for small, lower priced homes. In 2016, we expect 8-9% appreciation, flat unit sales volume increases, and continued tight inventories.
Everybody loves Zillow. I love Zillow. I love how excited it gets buyers and sellers when they see a home they love or what a neighbor’s house is selling for; a useful tool in many ways, for better or worse, it empowers the consumer. I look at Zillow to see what my clients/potential clients are taking as accurate information… and then I do my homework. The #Denver #realestate market is moving so quickly that even agents and appraisers can have a hard time keeping up. Public record algorithms don’t have the ability to distinguish the differences in the quality of one property from the other, upgrades, location, or if there’s a crack house next door. Algorithms don’t call other agents to inquire about that “Coming Soon” sign or have the latest data on solds as it takes some time to record.
The Los Angeles Times recently published an article that lays it out quite clearly. Though a “Zestimate” can have a low margin of error, it can also be alarmingly high. Imagine a scenario where you’re meeting with your perspective agent thinking that your home is worth 26% more than what it will really sell for.
Sellers, armed with the Internet, often have an idea in their heads about their home’s value. When I pull comparable properties, show them what the list vs sold prices are and how many days on market it’s taken those homes to sell, they may find a different story. Sometimes the news is good, based upon my data, their home may be worth more than they think. Other times it can be a let down.
Buyers burn the midnight oil searching Zillow then send me a link to their dream home. When I hit the MLS at 7 a.m. most often I find that this dream home is under contract… or sold three months ago. If you’re looking to buy a home, I’ll send you to REColorado, the consumer website linked to the Denver Matrix MLS I use so we can work together efficiently. It’s updated throughout the day, has great home search capabilities and saves me time looking for your real home, not the one someone’s already moving in to.
All this to point out that you now have access to a lot of information about my business. A lot of it is helpful and a whole lot of fun, but none is as accurate as hiring a professional; one who specializes in finding the right home in the right neighborhood that suits your needs. If you’d like an “Exact-i-mate” about what your home might sell for in today’s Denver market, give me a call I’d be glad to sit down with you and show you your market value and why.
Denver is a crazy-hot real estate market right now with low inventory and multiple offer situations, especially in desirable neighborhoods like Park Hill. Whether you are buying, selling or both, you’ll need to be very prepared and your first step is finding the right Realtor®. Listen to what the Bernuths have to say about their experience.
Jim and Mary Bernuth wanted to downsize from their beautiful Congress Park bungalow to something smaller but with the same charm.We looked at many homes but the heat turned up when their Congress Park beauty went under contract. Like most current sellers, they were nervous about finding the right replacement home and timing both transactions to make a seamless move. We found “The One” and quickly put in an offer… which was rejected. The sale of their home was complicated on the buyers’ side, adding to the stress. Thank you, Jim and Mary, for sharing how it turned out for you and why you recommend TracysDenverHomes for your real estate needs. Click here for more information on the current Denver market.
It’s one thing when I tell you something and quite another when my clients speak for themselves. Over the past decade Kelly and I have worked to turn her real estate dreams into realities. From selling primary and investment properties to buying her own place to finding the perfect home for her blended family, we’ve had some great adventures! Now this lovely Park Hill homeowner shares her experiences working with me and TracysDenverHomes in four real estate transactions. I love working with Kelly and she’s been wonderful about referring me to her family and friends. Forever grateful, Ms. Kelly!
I have great clothes. Really. I have a closet full of beautiful clothes for every occasion in only two sizes, perfect for the life I think I’m living. I have coordinated outfits and signature pieces, perfect for the office I pay for but rarely go in to, perfect for the camping trips scheduled but abandoned, mountain weather I’m rarely in, the soirees I attend but can’t find anything to wear to and every imaginable combo for the vacations I take and over-pack for. Theory and reality.
Most mornings I wake up at dawn, pull on a t-shirt and a pair of snappy yoga pants I bought for the classes I’ve paid for yet never gone to, take my son to school, return home to make a delicious hand-crafted cappuccino and head to the desk in my home office. I fire up the computer and the laptop, open my contact management program on one, my writing program on the other, log on to the MLS… and Facebook. (You know where this is going, don’t you?)
All of this is fine really, and I do get things done. I mean, something must be going right to be able to pay for the multiple devises, the software, the yoga classes, the office desk fee and the closet full of clothes. And I devote enough time to writing to keep calling myself a writer. But where is the gap between the life I think I’m living and the one that takes place day-to-day?
The question of theory is a check-in on the goals and resolutions for 2016. In theory I’m the girl who gets up at dawn, pulls on those yoga clothes, does the school drop-off, heads to the gym/yoga class, showers and dresses into the sassy ensemble I’ve carefully packed and loaded into the car, and shows up at the office for a full day of work as a busy Realtor. At the end of the day (in my mind) I return to my home office and work for an hour or two on the Great American Novel before throwing a few shallots in the pan to sauté.
As a self-employed single mother, my time is flexible but never my own. Like most in my profession, I wake up every day unemployed and have to get my hustle on, as we all do, but rather than punch a time-clock, I have to time-block to get all that prospecting, house showing, contract writing, negotiating, parenting, exercising and creativity in. Don’t we all? Frankly, I’m not sure how anyone does it, who has time to bake cupcakes, or which day “laundry day” actually is.
But this is not specifically a productivity rant, rather an inquiry into the glitch that keeps us from writing that book or taking that tango lesson. Modern American life asks us to buy into images of perfection, because without feelings of personal deficit, how could we sell things? Madison Avenue must create the perpetual void to be filled with luxury cars, hamburgers, fashion trend and heartburn. We’ve grown so uncomfortable with the empty space within, the interesting space, we hurl ourselves moment-by-moment, away from it with busyness. I call it perpetual prepping; getting ready to be ready. It is the yellow smoke that rubs its muzzle on the window-panes, seeking a way in or a way out.
2015 was a “structural” year for me. I opened the windows, dumped out my toy box, and got rid of what I’d outgrown, was no longer entertaining and/or working. The result was the grand realization that what I want I already have, I just want it more clearly. No sweeping changes or mid-life crisis, only the desire for simplicity, authenticity, and presence. I could dump my theory into the mixing bowl, add a dash of focus, blend until it becomes reality and, boom. Cupcakes!
I try this, making the commitment write more, I add time. I rearrange my head to include my body, specifically exercising before the caffeine has fully hit, a yogi move for sure. The night before, I pack my gym bag, my work clothes, briefcase, and put them in the Subaru. So excited to become that new and improved Tracy, it’s hard to get a good night’s sleep, but pop of bed at the first alarm. Being met with a “Hello” from Adele at sunrise should only happen if you’re just getting home holding your high heels, but I rally. Dropping Gabe at East, I pull into 24hr Fitness by 7:45 feeling pretty damned good about myself. Maybe I can be ‘that girl’ after all, I mean this is going great, right? Workout complete, I’d even remembered the towel, my self-esteem rising with the hot shower. Pulling on the nude fishnets I’d never worn, I’m troubled by the fact that the crotch seems to want to stay halfway between my knees and hips, the hem has fallen out of my skirt, there’s a spot on my blouse which hadn’t come out in the wash and I’ve not packed mascara. I soldier on into the office looking like a hot mess, reminding myself it’s day one. The next day goes better, though I forgot to pack a bra which wasn’t my best look at 25 either.
Day-by-day, as I morph my theoretical life with the reality I dream of, I learn how much courage it takes to truly be yourself. How much clarity it takes to slough off cultural concepts of needing to fill a void. I am that void, that mystery, and with all the new space in the toy box it’so much easier to find what I’m looking for. And though a few million things need practice, today I will be more present, plan, and try not to forget my foundations…my mother’s word for the brassiere department.
“How’s the Denver real estate market?” Being a Realtor© I’m asked question daily and plenty of things factor into the answer; Rising home prices, consumer demand, lack of inventory, new construction changing the face of our neighborhoods, not keeping up with housing demand, skyrocketing rents, the of effect gas and oil prices, interest rates, affordability index, rates of appreciation and what do I think is the next hot area? But the big idea is supply and demand.
The easiest way to bring all of this info into focus is by rolling out the charts and graphs. Take a look at the “Everything You’ve Wanted to Know About the DenverReal Estate Market” chart below and let’s see what it’s telling us.
See those two lines, the blue one and a yellow one? The yellow line is the number of homes for sale in metro Denver every month from January 2007 to December 2015. The blue line is the number of homes sold every month. Inventory peaked in July 2007 at 30,827 homes for sale. That was at the depth of our economic and housing downturn, when fear ruled our market, banks were being shut down, our local and national economies were in shambles, unemployment was rising, and consumer confidence plummeted. No one wanted to take the risk and buy a home. Reasonable doubt about the future took away our appetite for risk. On the seller side home owners were getting slapped with rising monthly mortgage payments as their Option ARM mortgages adjusted upward, sometimes forcing them to sell at the very worst time.
Supply and demand, baby; prices start to fall (2007 to 2009). Around 2010/2011 the market found some balance with 18,000 to 20,000 homes on the market but, like me in my yoga class, it didn’t stay balanced for long. Supply continued to fall… and you know what that means. Just like dating; it’s all about the inventory!
But let’s stop living in the past. In January 2016, there were 4,286 homes on the market! That’s nearly an all-time low for a January since records have been kept. For the past few years we’ve seen an incredibly strong real estate market in metro Denver as the supply of homes performs a vanishing act, putting the imbalance on the other foot. No three dimensional, super fancy, econometrics model can do a better job of explaining the imbalance in our market than this simple chart, but a 3-D printer might be fun.
I know, blah blah blah, Tracy, what about ME? To which I quip, that depends on what you’d like to do. If you own a home and are thinking of moving, it’s an off-the-hook seller’s market and you can expect to get top value for your home (more on pricing later). You’ll need to think about your next home too, and make sure you have planned the process correctly (this is where my mad skills come in) so the transition from your current to future home is seamless. If you’re buying, make sure you’re pre-approved with a strong lender and have a Realtor© who knows how to write a strong and winning offer. (insert mad skills)
So let’s say you’re renting, or one of those basement-dwelling millennials. With rents zooming to all-time highs, you might want to get out of the (basement) rental rat race and buy a home! You’ll need to cultivate patience and persistence but just in case you missed the earlier piece, the payoff can be YUGE! We expect prices to continue to move up for several years as the inventory balances with the demand, meaning you’ll gain appreciation in your home purchase for the next several years, longer if you stay. You could even turn that first home into a rental property!
There’s no better way to build wealth than owning rental properties for the long term. Home prices have risen, but so have rents, and interest rates remain at record lows. Smart investors don’t try to time the real estate market; it’s as difficult to do as timing the stock market. The vast majority of Americans who have built wealth as real estate investors have done it buying rental property and having their tenants pay it off for them over time. It’s not complicated and it works.
Of course, everyone’s situation is unique. If you want to talk about how best to take advantage of our real estate market and see what it can do for you please give me a call. I love talking about the real estate market!
Sellers and pricing Now that I’ve got you all pumped up on the Super-hero strength of our housing market, let me tell you another trend I’ve been seeing. Rising prices come as welcome news to sellers, but lately I’ve noticed that not every home sells in a weekend bidding war. Buyers are not stupid and overly ambitious pricing still means that homes languish on the market. Every day my inbox brings email announcements of price reductions after sellers and/or their agents over-shoot the mark. Call me and I’ll be happy to run a complimentary Comparative Market Analysis on your home to let you know what it’s really worth in today’s market. It’s always better to have an ‘exactament’ than a ‘zestimate’.