Summer Denver real estate buzzes with activity
Mortgage interest rates have dropped to all-time lows, below 3.0 percent on some 30-year notes, which, along with scarce inventory, is keeping Denver real estate at a fever pitch.
It’s not just interest rates, of course — pent-up demand from Covid has fully released and resulted in a record number of closings. The 6,664 Denver metro home closings in July represent a 12.47 percent jump from July 2019 and the highest number for any month on record!!
July saw a record number of closings in the Denver metro area. Source: Denver Metro Association of Realtors.
August looks to carry some of the same heat as the number of pending sales of 7,122 current contracts at the end of July represented a 27.07 percent increase from a year ago.
This activity has, as you would expect, has pushed prices ever higher. The average close price for a Denver metro single-family home jumped nearly 10 percent (9.92 percent) in July from a year ago to $601,863, a record high for the Denver metro area.
New listings also jumped in July — 14.85 percent from July 2019 — which is good news for buyers chomping at the bit for homes.
Record interest-rate buying power
I know a buyer who secured a 2.5 percent mortgage rate on a second home recently. That’s mind-boggling, given that represents a rate way beyond record lows.
But buyers across the nation are securing similar rates on purchase loans, which gives them much more buying power.
If we go a bit more conservative and compare a 2.75 percent interest rate with, say, a 3.75 percent rate (where I imagine they’ll at least be by this time next year), that translates into savings of approximately $200 per month on a $500,000 home (assuming a 20 percent down payment).
Looked at another way, buyers at the 2.75 percent rate would have about the same monthly mortgage payment of a $500,000 home as buyers would of a $565,000 home at a 3.75 percent rate.
This pulls even more buyers into the market as first-time buyers see more value now in buying than in renting, even with rising prices.
The average price of Denver metro homes. Source: Denver Metro Association of Realtors
The Denver Migration
Those of us who live here know the high quality of life our town provides. As California struggles with wildfires, crowded metropolises in Covid-19 lockdown and an increased number of flexible work opportunities, more of its residents have turned their eyes toward the Centennial state, and Denver as its economic hub.
Denver also offers opportunities for companies to expand operations in a location that is relatively more affordable than many large U.S. metros, and carries high worker demand. Consequently, employers can get more qualified employees at lower costs in some cases.
What buyers are looking for
Covid has revamped buyer wants I’ve noticed, in more ways than one. They don’t just want a gym, outdoor space and room for a home office, they want a home they feel comfortable in, in a neighborhood they want to spend time in, and the street they’re on.
Quite simply: Home just got that much more important.
These have always been big buyer interests, but they have become even more heightened since many of us have reevaluated the meaning of home in these last few weeks.
These are lessons for both sellers listing their home and buyers competing with other buyers to understand. They will heavily influence the market in the next few months, if not years.