The only incredible thing that happened last year is that the pandemic resulted in one of the strongest real estate markets in Denver. Even with the approved three vaccines for coronavirus, home sales are expected to continue being strong through the first quarter of 2021.
The mile-high housing market is no longer following traditional market patterns and instead of taking the usual pause during the festive season, things were busy here as more houses went under contract.
Here are some crucial considerations to help you navigate through the busy Denver housing market in 2021.
The acute inventory shortage is one of the new normal that most real estate markets throughout the nation are struggling to stabilize. The Denver housing market only had 3,400 housing units for both single and multi-family home options at the start of the year.
Despite the gradual increase in new constructions across the county, builders are not yet close to denting this falling curve. This trend means that the extremely low inventories could last a while longer and is expected to make this local market more competitive this year.
The pandemic resulted in many life choice changes as many people continue to move away from the busier and crowded cities. By March last year, the U.S. Census Bureau reported that Denver’s population had increased by 1.5%, making it the only county with the highest population growth in Colorado.
A different survey showed that most of the 11,000 people who moved to Denver at the start of the pandemic were looking for more space, cheaper housing, and a lower cost of living.
As we continue to adjust to the new work-from-home ethics, the preference towards more interior spaceis pushing builders to reemphasize the flexibility of all future home designs.
Buyers’ interest and the resurgence of the luxury market
The median annual home sales rate for properties priced more than $1 million rose by 80% at the start of the last quarter in 2020. The current post-COVID-19 use of space coupled with a lack of housing stock resulted in this sudden surge in the luxury market segment.
The demand for properties in the mountainous parts of Denver doubled in the past two months.
Many buyers are reportedly taking advantage of the current 2.87% interest rate for a 30-year fixed mortgage loan to improve their chances of securing their dream home. Low mortgage interest rates usually boost a buyer’s purchasing power by reducing high-priced tier homes available at reduced monthly payments.
According to the Mortgage Bankers Association (MBA), the 30-year fixed rate is projected to gradually increase to 2.9% by the start of the second quarter and eventually go back to 3.2% by the end of the year.
Home sellers vs buyers: who will 2021 favor more?
According to Realtor’s housing forecast, inventory shortages coupled with rising demands will give home sellers more control over the Denver housing market this year. A slight rise in mortgage rates will reduce affordability and impede any future increase in home prices through 2021.
The forecast additionally projects a 12.5% increase in home sales throughout Denver this year and ranks it 4th out of 100 metro areas with the highest year-over-year home sale rate. Home prices this year are expected to drop from 12.8% to a modest 5.4% yearly pace.
Real estate economists concur with the report but caution that affordability might still be an issue as the mortgage rates are set to stabilize in the first quarter before they start to rise in the second half of 2021.
With the expiration of forbearance contracts, more sellers will have no other option but to list their properties gradually in the year. This kind of agreement helped save millions of homes from foreclosure during the pandemic.
If mortgage rates will exceed the 3% mark by June, buyers will have a hard time offsetting the historic-high home prices meaning that sellers might still be favored more by the Denver housing market.
The acute inventory shortages suffered throughout last year resulted in approximately 5.7 million missing listings. The median age for buying a home in America is 34, and Denver is set to have a 1.8% increase in people turning 34 in the next decade. This rate is comparatively lower than the 7.4% national increase in the number of people turning 34-year old and means that the Denver housing market will have less buying pressure in the coming years.