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Denver’s real estate market is officially on fire. And with the confluence of our housing dearth and historically low interest rates, there’s no sign of a shift on the horizon.
This is all great news for sellers, but how do buyers best navigate the ultra-competitive environment? We spoke with Anthony Rael—chairman of the Denver Metro Association of Realtors Market Research Committee and a Realtor with RE/MAX Alliance—about the most recent market statistics for the 11-county metro area and what the numbers mean for those looking for a home to call their own.
The Data
For the month of May 2015, the median home price for single-family detached homes in the 11-county metro area continued to rise, increasing 2.57 percent in May 2015 to $359,000. The days a home spends on the market dropped 15.6 percent from April to May 2015, logging an average of 27 days on the market. Active inventory—while still very low—increased 11.5 percent in May 2015 to 4,545 single-family homes. Condos increased 17 percent in the month of May, to 1,112 units. That slight increase in inventory is important, says Rael, who expects this trend continue as the summer progresses. More homes on the market just might take the edge off the current furor.
(Read about Denver’s condo construction woes)
The Upshot
There are good homes to be found at every price level, Rael says; it just takes a steady hand and a refined list of priorities. Buyers need to walk a fine line: Be financially ready to bring your best offer first, yet be mentally prepared to walk away from a bad deal.
“The dynamic now is that almost everything is priced at the top of the market, and that can cause a feeding frenzy,” says Rael. “I call it the ‘eBay mentality,’ where a buyer gets into a bidding war and thinks, I have to have it.” The danger is that even if a buyer gets under contract, two weeks later they look at the price they are paying and experience buyer’s remorse. “They think, What did I just do?”
The Strategy
In one word: preparedness. Buyers need a clear understanding of their financial situations and to research the prices in their chosen neighborhoods—just because they are approved for a certain amount doesn’t mean they should spend that much. And Rael cautions that once under contract, buyers shouldn’t let a tight market allow the seller to make unreasonable demands. There’s no reason to forgo the standard inspections, and if homes appraise for less than the contracted price, buyers should think hard before coming up with the difference in cash.
“I just don’t have the stomach to recommend that to my buyers,” says Rael. “I hate to use the ‘B’ word, but when buyers make up that difference in appraisals and we feed into the craziness, that’s how a bubble forms.”
The Silver Lining
There are pockets of sunshine in the market for shoppers with deeper pockets. Although luxury condos priced above $1 million fetched 130 percent of asking price in May 2015, homes in the $500,000 to $999,999 range saw average home prices drop slightly. The total number of homes sold in this price range for the month of May also dipped, which Rael thinks is a good sign for the region.
(Check out 5280‘s picks for Denver’s Best Neighborhoods 2015)