While metro Denver’s housing market has cooled slightly in recent weeks as more potential buyers have turned their attentions to vacations, a panel of real estate experts said Tuesday huge relief won’t come for buyers anytime soon.
“We’ve just got a super-charged price appreciation scenario going on right now,” said Charlie Farrell, CEO of Northstar Investments.
The Denver Gazette and news partner 9News presented a video conference discussion of panelists titled “Surviving the Overheated Housing Market” Tuesday. Farrell joined realtors Jenny Usaj, of USAJ Real Estate, and Lydia Lin, owner/operator of ONE Realty, as well as Matt Rankin, vice president of operations for Taylor Morrison Homes and Dan McMahon, home financing director for the Colorado Housing and Finance Authority (CHFA).
“In Denver, we had the perfect storm hit our residential real estate market last year,” Usaj said. “Interest rates have been low. People who have been Zoom-calling from their closets wanted more space and focused on their homes. When the whole city closed, people were at their homes and in their backyards and focus shifted to improving.”
That, in addition to the influx of new residents wanting Colorado’ quality of life if they could work remotely anywhere, created huge demand. The inventory of homes has dwindled in the last year-plus, while home prices continue to soar – creating an “extreme seller’s market.”
The latest numbers from the Denver Metro Association of Realtors paints a pretty clear picture: The average closing price for detached single family homes soared to $700,559 in May, up 29% from May 2020. Meanwhile, the inventory of for-sale homes plummeted to only 2,075 active listings at the end of May. That’s down 20% from April, and a decline of 71% from May 2020’s inventory level.
“We’ve put as much inventory out there as we possibly can,” said Rankin of Taylor Morrison. “We sold 30% more homes than we were able to start last year.”
Some of that delay in new inventory came because of skyrocketing lumber prices, the February freeze in Texas delaying items like PVC pipes, and a labor shortage, Rankin said.
It didn’t help that institutional investors have swooped into Denver’s market hard, sometimes snapping up homes first-time buyers would have nabbed, Farrell said.
“They’re looking for returns, and residential real estate has been a hot performer,” Farrell said.
Panelists offered their best tips to navigate the challenging market.
Usaj said looking in suburban markets can help, in additional to being patient and waiting for that one listing that might be on market longer than others.
“There’s a big shift in priorities,” she said. “It used to be number of bedrooms and baths. Now it’s all about the backyard and the outdoor space. … The condo or townhome market in some areas is a little less frenzied, too.”
Lin went so far as to recommend certain neighborhoods, especially in southwest Denver like Ruby Hill, Harvey Park, Westwood and Lakewood.
“Lakewood is just crushing it right now,” Lin said, adding that being creative about down-payment sources might also help – including asking parents.
“Come prepared,” said McMahon. “We don’t have a Colorado housing market – it’s all about neighborhoods. Some homebuyer education is important. Take time to understand what it’s going to take to purchase a home, including budget.”
McMahon said be sure that research includes down payment assistance grants for first-time buyers, veterans, etc.
Farrell reminded buyers to get their credit scores checked well in advance and fix any issues before diving into the market.
“You don’t want to do that check when you’re writing an offer,” he said. “You must work well ahead of time.”
Viewers can watch the full panel discussion video replay here.