Buying a home in Denver, whether it’s your first or you have been through the process a dozen times, can be a stressful experience. For many people, it is the largest financial decision of their lives, and since where you live is one of the most personal decisions you make, the stakes can be incredibly high. It doesn’t have to be stressful though, with enough knowledge and an agent who both knows the market and has your best interest in mind, the stress can be taken out of the equation.
Nationwide, real estate prices have skyrocketed in the past two years, and the Denver area is no exception. Many have fled to the suburbs seeking more space to facilitate Work From Home (WFH) and social distancing needs. Coupled with a construction worker and material shortage, it has led to ever increasing prices.
This has also caused some market anomalies in Denver which has sent home prices to record highs and inventories to record lows. According to recent data, the average home sale price in Denver this spring is over $700,000, up almost 20% from last year.
The most significant change from last year is the tight inventory. In January, there were less than 1,500 properties on the market in the Denver area, compared to over ten thousand a year ago. The extremely low inventory is leading to the high prices and a definite seller’s market.
This does not mean, however, that it is impossible to buy a home at a fair price in the Denver area. With proper planning and knowledge of how the market works, buyers can still find a home at a reasonable and fair price.
My team and I have put together this guide on what home buyers in Denver need to do and understand in order to successfully purchase a home in these market conditions.
Be Prepared to Make a Clean Offer
When demand is high and inventories are low, sellers will clearly have the upper hand in negotiations. Prices are indeed quite high and there is little reason to believe that will change anytime soon. Even in this competitive market, however, sellers still have the same concerns they always do.
If a deal falls through at the eleventh hour, it can still be difficult for a seller to get a similar offer a second time around as the most interested buyers will have likely moved on. Secondly, they usually have to close on their timeline as they are likely also in the process of buying their next home as well.
Making a clean offer will still be attractive to today’s sellers and can save a buyer some serious money if they are well prepared. We are still seeing offers with no contingencies with high down payments and high credit scores being accepted ahead of offers for thousands more. If you are in the market to buy, having your financial ducks in a row is needed more than ever.
This does come with one caveat though, there is a trend of many potential buyers foregoing the home inspection to make their offer more appealing. While this certainly is attractive to sellers, we caution against this as there is usually just too much at stake to make this a good idea. While this is without question a sellers market, buyers still must exercise their due diligence and judgment.
Well qualified buyers making clean offers are seeing their offers accepted for moderately less than those with contingencies. The same old rules still apply and can be used to your advantage.
Understand the Effect of Rising Interest Rates
There has been a lot of talk about rising interest rates, and they have indeed gone up in the past couple months. While this should cool off a hot market, so far the data show this has not happened. What we have seen is many potential buyers who may have been sitting on the sidelines are now actively looking as they know the clock is ticking on continually higher rates.
How much will rising rates cool off the market as we get further into 2022? No one knows and it is foolish to try to guess. What we do know is that the Federal Reserve is planning on raising interest rates roughly every six weeks throughout the year. While the effect on home prices remains to be seen, we can say with certainty that average monthly mortgage payments will rise.
We do have reason to believe that there are many cash rich investors sitting on the sidelines waiting for rates to rise so they can snap up properties at a discount. This is one of several reasons why the effect of rising rates is hard to predict.
Unless you are putting more than 20% down on your property, it is best to close on your new home sooner rather than later.
Work With a Real Estate Agent You Can Trust
While in all likelihood it will remain a seller’s market throughout the year, a good agent in your corner can be a huge asset. In this market it is more important than ever for well qualified buyers to have an agent who knows how to negotiate. Contrary to what many think, good negotiation skills are less about being “tough” and much more about being able to communicate to find out exactly what everyone’s needs are. It’s all about finding a solution that satisfies everyone, and in order to do that it takes experience and knowledge of the ins and outs of the Denver market.
We have been helping our clients buy and sell homes in the Denver area for a long time. We know this market as well as anyone and are committed to providing a quality experience to all our clients and help them find the best house at a fair price.
This market does present some challenges, but we are confident we can be your trusted advisor and get you into the home of your dreams.
Contact Skye Templin for all of your real estate needs in the Denver metro area. (: