Ok, let’s bite into this housing market! There has been SO much chatter in the past few weeks about what we are seeing, what is going on, and what some people feel will happen moving forward! I’ve had the opportunity to listen to some fantastic conversations about Denver, housing, and mortgage rates.
Let’s first talk about the “house bubble/crash.” Boy, have I had this convo about a million times over the past 6 years. When is it going to burst? We can’t sustain this. The housing market is going to crash. We are headed for a recession. Does all of this sound familiar? Maybe all too familiar. So, let’s talk about it!
2008 when shit hit the fan, the Denver market and the US as a whole were in a much different space. We had unregulated mortgage lenders giving money to anyone. With those mortgages, most were on an adjustable rate, so when things started to fluctuate, folks quickly could not afford the house they should have never been approved to buy.
Today, the lending world is HIGHLY regulated. We have the checks and balances to ensure the loans given to folks are actually within the buyer’s ability to pay. We have 30-year locked mortgages so consumers can ensure they can afford it
Now, let’s talk about inventory. When the bubble burst, Denver had over 32,000 active homes on the market. We currently have just over 3,200 homes. That means we would need to have 30,000 houses hit the market to create a similar situation as we had before. Does this sound likely? No. And with such a shortage of inventory, this extra bump in homes hitting the market is a major relief for buyers. Having had such a low level for so long, this is a welcome sign. If this past spring has taught us anything, it’s that things can get wild!
Alright, so we’ve talked about inventory. Now, let’s talk about mortgage rates. Yes, they have been on a steady incline for the past few months. As much as we don’t love to see them hovering in the mid 5% range, we knew that the market had to adjust at some point. Loans with rates in the 2% were highly abnormal and not something that the industry could have held onto for much longer. When my dad first moved to Colorado in the 80’s, he purchased his first home at 18% interest. Yep, you read that right. So when we see mid 5%, I think to myself, it could be worse.
The last factor is the job market. With unemployment continuing to be lower, wages on the up and up, and companies who can’t hire fast enough, again, we are nowhere close to that bubble/recession-bursting housing market that everyone is talking about.
Let’s be real. There is no way that we could have sustained a housing market at the levels of increase that we have been seeing. 20% + appreciation in a single year is unreal and not normal. Coming off one of the craziest springtime markets I’ve ever been part of, I am happy to see the relief. As kids get out of school for summer, we always see demand lower. So this is a normal part of the buying circle.
So all you buyers out there, NOW IS YOUR TIME!!!! As we see more inventory and demand leveling off, it’s a great time to enter the market. Yes, interest rates are going to be higher, but remember, you’ll be a homeowner instead of a home renter. This is where the magic happens. I do feel that we will see some normalizing to our market; THANK GOD. This means maybe not 40+ offers on a single home. Maybe not $100K+ over asking. Maybe not full appraisal gaps. I see these as all positive. It allows the buyer to write a solid contract and get to closing.
Sellers, this will be an adjustment period for you as well. Pricing is going to be more important than ever before. I would plan to underprice your home to drive up demand. You won’t be reaching for the stars. And while the market is still moving, maybe expect to get a few offers instead of 20+, and set the expectation to achieve list price, and anything over is a bonus.
The one question that I keep having come up, and continuously talking about over and over, is how folks believe a crash will happen. If you have a more regulated mortgage industry, a stable job market, and slightly higher interest rates along with record low inventory levels, how does that show a market crash? Do we anticipate housing prices to decrease dramatically? We will continue to watch the date and numbers!