There are some very interesting things happening in the market since our last communication back in August. As I am getting the same questions from many of you, I thought this would be a good time to get an update out there to help keep you in tune with what is happening, especially since 2022 is projected to be another strong seller’s market.
Denver Metro Area Home Report: December
As predicted, things picked back up heading into last fall and we saw a record increase in real estate prices for all of 2021. With historically low interest rates in place, buyer demand remained high and with the everlasting limited inventory situation, this continued to push prices higher in the real estate market. Then to add insult to injury, we had the devastating Marshall and Middle Fork fires that was not only tragic to all those families who lost their homes right before the New Year holiday, but will further magnify the inventory shortage we are facing with a whole new wave of buyers who will now be looking for homes as the area impacted will take several years to rebuild. Sadly, I would imagine this will force some of those families to relocate outside of the Denver Metro area with a multitude of factors that will impact them. Let’s pray for end to the drought situation we are facing so we aren’t contending with fires next summer, let alone the tragedy we just had at the end of December.
- We set yet another record for low inventory, which saw 1,477 active listings at the end of December. This is down 42% from December of 2020, which was at 2,541 homes that were active and both numbers are extremely low which such strong buyer demand. The historical average numbers of homes for sale at the end of December from 1985-2020 is 12,652 homes, so you can clearly see the inventory shortage we continue to face and why prices have soared.
- 420,000 people moved to the Denver area over the last 10 years, with Broomfield County experiencing the largest growth at 33%. From 2019-2021, the population increased by 96,000 alone with Millennials representing the largest part of that increase. Again, until demand can subside with people moving here and with the low interest rate environment, the continued increase in prices should continue to march forward in the foreseeable future. I’ve been a proponent of interest rates to increase for some time, but the Covid environment has forced the Fed to continue unprecedented policy changes to keep the economy moving forward.
- The average rent in the Denver market increased from $1,545 to $1,805 representing an almost $300 per month increase. Not only are we facing inventory shortages in the resale market, the rental market is just as competitive with such an influx of people moving here.
- Approximately 991 homes were destroyed in the Marshall/Middle Fork fires and another 127 damaged. In the 1,778 homes around the impacted area, the value of that real estate is estimated to be around $825 million so these were above average homes that were destroyed. With supply chain and labor shortages that continue to drag on things getting done in a timely manner, this area will take several years to rebuild.
- Another item that may impact many of these families is inadequate homeowner’s insurance as many policies will cover replacement cost, NOT the actual value of the home itself. It might be wise to contact your P&C agent to review your current policy to help ensure you have adequate coverage on your home.
- Interest rates have also ticked up slightly to the 3.5% range, which is still super low from a historical perspective. In having conversations with other people, it still amazes me that I find some folks worried about 3.5% interest rates. The mere fact that rates ever got as low as they did just goes to show that some form of reality needs to start setting in, and with 7% inflation as I recently saw on the news, the sooner rates start ticking up the better. Personally, I would rather see the slight uptick in rates versus a sudden shock to the system caused by a more aggressive move, which could have adverse consequences.
- The average increase in real estate prices from 1990-2021 is at 7.5%. Just looking at the basic economics of this, buying a home still makes a ton of sense when using the leverage of interest rates and debt. To illustrate, even at the current 3.5% interest rate environment, you are getting an additional 4% price appreciation on the debt used to finance your home, and earning 7.5% on the money you put into the deal itself. 2021 also saw the highest increase in home values at over 16%, which is well above anything we have experienced over the last 10+ years being in an already strong market.
- In the 3rd quarter of 2021, 17% of the home sales were made by investors, which is up from 9% and constitutes institutional investors as well as smaller ones.
In closing:
While some of this data may be concerning, it’s important to note that this shouldn’t scare you from making any decisions in buying, selling, or a combination of both. I have had continued success in getting clients into homes as needed, you just need to understand where we are in the marketplace and be prepared. If you own a home and have been wanting to move, there are strategies we can employ to make that happen so I would encourage you to reach out and have a conversation. We just need to sit down and review the economics of it to make sure it makes sense for you and your family, and you have my commitment to steer you in the right direction. The good news is you have a dedicated professional in your corner working hard for you, so feel free to contact me with any questions or concerns you might have!
Property Searches – Re-Sale and New Construction Communities:
As we have limited inventory, many people are considering new builds. Since new build communities do not readily show up in typical real estate search when looking at properties, I have now partnered up with another search feature we can use to discover the new build communities out there. To view these just visit the search link on our website at: https://fullerhomeoptions.com/property-search/
Now you can search both properties for sale through the MLS or explore new build communities. Feel free to go in and play around with it and as always reach out if you should have any questions!
FREE Market Analysis
One of things I want to always make available to all of you is market updates on the value of your home whether you are thinking about selling or not. It’s always good to have a feel for what your home may be worth, so if this is of interest to you or anyone you know, feel free to reach out and I would be more than happy to provide these to you at no cost.
As always, if you or anyone you know should have any real estate needs, please consider using me as a resource as your business and referrals are GREATLY appreciated!
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