The Denver real estate market continues to break records despite the ongoing pandemic, with a new high average sale price and the most home sales of any August on record. Both attached and detached homes continue to appreciate in Denver, a welcome sign for Denver homeowners and further evidence of the strength of the housing market. Attached homes and condos have appreciated at a more modest rate, while detached single family homes are up 13.8% year over year! How does the Denver real estate market continue to outperform itself while providing much needed stability in these turbulent times? The answer lies in the relationship between supply and demand plus increased affordability due to interest rates.
Supply and Demand
For the largest group of millennials, who are reaching age 30 and are enticed by shockingly low interest rates, the search is on for the perfect home to call their own. The problem? Lack of inventory. Buyers have 50% less homes to choose from this year yet their demand remains strong. Pending contracts are up 32% year over year which leaves us with just 1.32 months of inventory for attached homes and .77 months for detached homes. For the $400,000 - $500,000 segment of the detached market,that number plummets to .4 months of inventory. To put that into perspective, a market in balance would have six full months of active inventory for buyers to choose from.
Interest Rates
Mortgage rates seem to have a bigger impact than Covid-19 for Denver buyers. For now mortgage rates remain at historic lows, offsetting appreciation and providing incentive for buyers to get off the fence about financing their next home. Rates will go up eventually as the economy stabilizes. We can't be sure when that will happen, but they are predicted to hover around 3% for the remainder of 2020. When rates do go up,buyer demand will likely relent a bit, so if you're thinking of selling, now is the time!
Buyer Opportunities
It may be competitive right now, but there are some sub-markets that afford more opportunity for Denver homebuyers. As a direct result of Covid-19, appreciation has slowed in the downtown condo market and days on market are up.While some buyers are wary of shared amenities in light of the pandemic, demand will eventually bounce back. For now though, there existsa unique opportunity to get into a downtown condo with less competition. For buyers that are reluctant to engage in a bidding war, new construction provides another opportunity to purchase ahome with straightforward contract terms. New home starts are up 36% year over year which should help to alleviate the inventory shortage. There are a lot of nuances with new home sales so be sure to enlist the guidance of a professional Realtor to be a part of your home buying team!
While mortgage purchase applications are up 28% from last year and buyer interest has been high throughout the summer, we did see a 20% decline in showings week over week as kids went back to school. Will showings go back up once school routines are established? Check back next month to see how this might impact the numbers for September.
Socials