Despite COVID, Denver homes sell at record highs
By: Russell Haythorn, Posted at 10:45 PM, Feb 22, 2021 and last updated 6:19 AM, Feb 23, 2021
DENVER — Supply still can’t keep up with demand in the metro Denver housing market.
New numbers from the Denver Metro Association of Realtors (DMAR) show the average home sold in just five days in January. Denver was second only to Tacoma, Washington, according to Redfin.
We’re taking a closer look at the boom and whether it will bust.
One of the things that makes this one valuable and pretty fun is that they have all the original woodwork,” said Lori Abbey, broker associate with her signature group – The Abbey Collection at Compass Real Estate, as she showed our crew around one of her new listings in Denver.
The woodwork is definitely part of the charm of the Congress Park bungalow Abbey just listed.
“I mean, there’s hardly a scratch,” Abbey said pointing out a built-in bar and buffet.
That’s one of the things Abbey knew her clients, Scott and Sarah Osborne, would love about it.
“I can’t think of a better place to raise two boys,” said Scott Osborne, the homeowner.
The couple bought the bungalow in 2016.
“It was a shocking market to enter, coming from Oklahoma,” Sarah said. Their family of four has quickly outgrown it. “We bought this house four years ago,” Scott said. “Our kids were six and three at the time and two little boys grow quickly. And unfortunately, we’re just growing out of this space.” On the fortunate side of things, their $700,000 investment in 2016 has appreciated quite nicely. “We’re listing at $849,900,” Sarah said.
The numbers are staggering in metro Denver. According to DMAR, the average home price is now $629,000. That’s a $100,000 jump in one year — up from an average of $530,000 in January 2020. “It’s almost like the market is drunk,” said Chad Nash, senior real estate adviser with Compass.
“The forecast I’m reading is calling for between a 6-10% increase more in price,” said Tony Hernandez, affiliate professor at Metropolitan State University of Denver.
The Osborne’s have witnessed that first-hand. “It’s the best investment I’ve made in the last 4 years,” Scott said.
But these sellers are also buyers.
“We are going to take the equity from this house and put it on the next house,” Scott said.
They’re keeping a close eye on the market.
“If something you like goes on the market, you have to be ready to act on it immediately,” Abbey said.
“You go look at a house thinking it’s doable and then you get outbid,” Sarah said.
The bidding wars are astonishing.
“I listed a home this weekend for $544,000,” Nash said of a home he listed in Northglenn. “It went for close to $590,000.”
Nash says it’s an age-old issue — supply and demand.
“It’s driving the home prices up, astronomically,” Nash said.
Inventory in metro Denver is the lowest it has ever been, according to DMAR.
Metro Denver experienced record-high inventory in May 2008 after the housing collapse, with 26,000 homes for sale.
Fast-forward to January 2021, and metro Denver is experiencing record-low inventory, just 1,200 homes on the market.
In January, homes stayed on the market just five days. That’s down from an average of 24 days in January 2020.
Part of this is droves of people relocating, according to both Abbey and Nash.
“They’re coming from California, Washington, D.C., New York, Dallas, Texas,” Abbey said. “If people continue coming, we don’t have enough houses to put them all in.”
Both Abbey and Nash say the work-from-home phenomenon is attracting even more people to Colorado.
“Looking to say, ‘If I don’t need to be in the office every day, why can’t I go get this same house in Colorado? In Denver?’” Nash said.
“It’s a great market if you’re coming from California or New York,” said Hernandez.
Hernandez says, sadly, the market is squeezing many out.
“People making under $54,000 a year probably cannot buy a home,” Hernandez said.
So, what’s next?
Nearly all of our experts agree there’s no looming bubble like 2008.
“I don’t see a bust this year,” Nash said.
“The free market says sell what you can for as much as you can, and that’s what people are doing,” Hernandez said.
“I don’t think it’s a bubble like the last bubble we had,” Abbey said. “That was a bubble based on mortgage fraud and a variety of other things. That was a poorly-regulated market.”
“It’s just going to be tough as heck out there for buyers,” Nash said.
Nash does have a warning, however.
He sees a growing number of somewhat sketchy lending practices popping up, like ads promoting the idea you only need $1,000 down.
“I think these programs lure buyers into this idea, ‘Hey, we’ll do it for a $1,000 down, but we’re going to take 20% of your equity when you go to sell,’” Nash said. “Don’t go that route. If you don’t need to, go to traditional CHFA, go to traditional metro DPA. Don’t just go for this shiny carrot.”
Nash and others suggest the carrot you should take advantage of at the moment is super low interest rates.
Right now, interest rates are hovering around 2.8% on a 30-year mortgage and just 2.35% on a 15-year fixed mortgage.
And finally, if you’re selling, experts say don’t get greedy.
“Because people are savvy, Abbey said. “They’ve got Zillow. They’ve got the internet. They’ve got all sorts of things.”
“What I tell my sellers is to be reasonable,” Nash said. “Even though this is a seller’s market, it’s a fair market. If you try to be greedy, the market is going to punish you.”
Back at the Osborne home, the craziness continues. They listed in early February right at $849,900.
“It sold in one weekend for $930,000,” Abbey said. “We got $80,000 over ask.”
Further proof, the market is as hot as it has ever been.