What in the world is going on with the Denver housing market?

Question

...what in the world is going on with the Denver housing market?

1. Inventory is very low - for all of the homeowners that bought or refinanced during COVID that have a sub 3.5% interest rate don't want to sell when rates are at 7%. Why? If they are trading up, why trade a 3% rate for a 7%. We may continue to see inventory issues until sellers feel there isn't a huge gap in rate exchanges when trading up.

2. Luxury housing has slowed - the entry level home in Denver still stands at roughly $500k-$600k. During COVID, folks were able to afford a little bit more seeing rates were so low and their monthly mortgage was kept down. Now, they are getting priced out of those more expensive homes because of affordability with rates. Now, there the entry level home price point of $500k-$600k has seen a huge uptick. A nice home priced right and in a good location, is still selling quick!

3. Rates will ulimately decide where the market goes - having already mentioned the importance of rates to sellers..rates of course, have a huge effect for buyers as well. Some buyers are considering waiting until rates to drop to get into their home. Seeing a large numbers of buyers are considering this strategy, if rates do drop and many get into the market at the same time, this will likely cause home prices to go back up.

Bottom line - we need more inventory. Inventory would put us in more of a balanced market for both buyers and sellers.

Thanks for reading!

Matt M. · Answer

Inventory will suffer for the foreseeable future. The only people moving are from divorces, deaths, relos, first timers and cash buyers. The move up market is dead. People are making things work in their current homes, however people are running out of savings. HELOCs are getting tapped along with cash out refis. The next thing will be job loss, then starts another round of foreclosures/short sales. There is your inventory. We had 50k+ homes on the market when I was doing REOs.

Baring something catastrophic, rates won't be back down for a LONG time. Could be years... Plan accordingly.

Matt M. · Answer

You should be able to qualify on your own and be comfortable paying the mortgage. If you can't, now is not the time to risk it.

Kenny Smith · Answer

@Madison McCarthy

All valid concerns!  I think it all depends on what type of strategy your are implementing, in what location, what price point, if your renting vs already a property owner, etc.

If you think it would be of any value to hop on a call to chat through some options, shoot me a private message!

Best,

Kenny

Matt M. · Answer

Then I'd buy now. Rates will go up probably into the 8s and maybe 9s. While the prices might decline, the payment amount won't. I wouldn't worry about timing the bottom, because you won't. If you hold on long enough, it doesn't matter the price you paid as it all comes back. Denver has been 6% appreciation for the past 50 years IIRC.

V.G Jason · Answer

Job loss is coming. Savings have been drained, debt has been maximized, when job loss comes you'll start seeing some people move down. That's the next domino to come, Powell pretty much said it's inevitable. I would be surprised if Fed Funds doesn't get near 6% before stalling. There will be some blood on the streets. Market specific is obviously going to be the case, but I think you'll see inventory trick up. You'll also see people use every tool in the book before selling, such as renting extra rooms out(even as a family). We still need equities to get whacked harder before real estate. I mean rate hikes started when June, July? We're not near the feeling of the pressure of it...that'll be at least a year from it. Plus, with limited inventory, maybe even longer. It's the rental market that'll collapse first, locally, before housing.

Trevor Richardson · Answer

To me interest rates, inflation, jobs are all distractions from the underlying issue. The country does not have enough housing supply to stabilize the market. I’d consider Denver a mountain west market, we are seeing the slowness of 2022 already evaporating here in Reno like overnight. 3-4 months ago it was doom, no buyers as the western markets started to correct, now it’s right back to multiple offers, rising prices. Builders are pulling incentives because they are getting back to waiting lists. Whiplash. We don’t have enough housing.

The housing supply/demand curve imbalance does not give a rip about interest rates when people still have equity.

Madison McCarthy · Answer

I am wanting to get my first property and house hack to reduce my current living expenses. Ideally, the property would cashflow when I move out in a year or two. My main concern is that the value of any property I buy will decrease drastically in price as the rates are likely to stay high. If properties drop in price, then other people will be able to decrease their rent while mine would have to remain high if I want to meet the bottom line. Worse case scenario, I lose equity and have negative cashflow. I'm wondering if I am being too near sighted and given enough time rent and house prices will surpass what they are today.

What in the world is going on with the Denver housing market?

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