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2021 DENVER REAL ESTATE MARKET OVERVIEW
Inventory hit an all-time low of 1,435 homes on the market at the end of December 2021, wrapping up another year of significant wealth building for homeowners in the Denver market.
The average sales price of a single-family residential property in Denver finished the year at $702,000, up 16.6% over the same time last year.
The average days on market has moved from a low of only 7 days in June to ending December at just shy of 30 days. That sounds implausible given the speed the market is experiencing and incredibly low inventory. However, a handful of poorly prepared and over priced homes along with over 100 high-end properties experiencing 120 days or more on market is driving the average up. This is a typical seasonal pattern.
Well prepared homes are still selling fast and over asking price on average. Almost 75% of properties are selling at or above the asking price, which is unheard of this time of year. For perspective, December of 2019 had just shy of 45% of properties selling at or above asking price.
Just over 20% of properties are experiencing a price drop from the original list price, up from a low of 6% in May.
With inventory starting the year so incredibly low, we anticipate a very, very busy spring.
INTEREST RATES
As we have talked about for quite some time, rising interest rates is the most significant market shifting characteristic.
The Federal Reserve has a big challenge right now to manage out of control inflation driven by supply chain issues and an oversupply of capital. In an effort to slow inflation down, the Fed is aggressively ending a 12-year market support strategy of purchasing Mortgage Backed Securities (MBS rate is the benchmark for 30 year fixed interest rates). The purpose of the strategy was to artificially lower mortgage interest rates in a desire to drive the economy.
In the beginning of the pandemic, in order to avoid collapse, the Fed stepped in and purchased MBS at unprecedented levels, both supporting the housing market and driving interest rates even lower.
The Fed is ending its purchase program in Spring of 2022 and has committed to 3 interest rate hikes this year in response to inflationary concerns. The market has already responded with 30-year fixed retail mortgage rates rising.
AS RATES RISE
We will see affordability in the Denver market become an issue. Many will laugh and say Denver real estate is already unaffordable, however incredibly low rates have made purchasing a more expensive home relatively affordable.
First time homebuyers will most likely be hit hardest by a rate rise and many buyers who hoped to purchase this year may no longer qualify for financing.
This likely resulting reduction in demand may slightly ease market competition, and will ideally have a long term positive effect on increasing inventory levels. I anticipate late summer or early fall before a meaningful impact on inventory is experienced.
Homeowners who are educated on the likely rise of interest rates may be inspired to take action this Spring.
2022 APPRECIATION
We anticipate a 6-10% average home value appreciation in 2022, almost exclusively experienced in the first 6 months of the year.
By late summer/early fall, I am anticipating a market slowdown driven by mortgage rate increases and a last 6 month of the year negative price curve, most likely ending the year in a 6-8% appreciation range. A negative price curve (declining values) is a typical seasonal phenomenon absent in the market the last two years.
Some factors that could influence appreciation:
- Out of control inflation and consumer confidence dip, labor market is affected as a result of industry shut down, slowing down buyer activity, decreasing demand and slowing appreciation.
- Interest rates increasing to over 5%. Short-term at least this would likely eliminate 30% or more of current buyers who would no longer qualify, markedly slowing demand and appreciation.
- If rates remain low, which is still a possibility, the speed of the market will not shift and we could see 12% or more appreciation this year.
Again, interest rates are key.
YOUR ACTION:
Educate consumers on the profound long term financial impact of capitalizing on financing conditions available today for refinance, cash out, getting rid of that home equity line of credit (rates are going up and the expense will be going up), or buying investment or primary residence real estate now. Do it with no attachment to the outcome, simply knowing that you want the people you care about to make smart wealth decisions and be best served.
- Make a phone call to each individual
- Write an email to each individual
- Shoot a video to your database
- Write an email to your database
- Post on social media
Here is a sample email and phone script PDF. If you are having these conversations or writing these emails with the enthusiasm of helping people live their best lives, regardless of their decision, you will let go of the fear about the action.
Fear sucks. And the fear we most often feel is totally irrational. You are afraid of someone’s opinion of your behavior, and that fear can stop you from taking action of sharing information that could profoundly affect other people’s life.
Stop that shit…it’s not how you want to live; it’s exhausting and soul crushing.
Do this out of love, desire to contribute and let go of the expectation of business and be 100% invested in being an advocate for others. But do it with everyone in your database. Read the email script and it will give you understanding of how consultative this is.
GET IN TOUCH WITH US
If you love our content and are a full time real estate professional who is dedicated to incredible experiences for your client, we’d love to chat.
