Jan Parrish, Realtor

"Helping Create Your Life's Story!"


Your Castle Real Estate

Denver’s Seller’s Market Gains Strength

Welcome to the Real Estate Market Midyear Report! Here’s What We’re Seeing:

Average Home Price: The average price of a home in metro Denver leapt another 12 percent in the past 12 months. I believe 2015 will continue to play out very strong and here’s why: The number one driver of home price change is the amount of inventory on the market. Our market inventory continues to drop, down another 17 percent from this time last year for single-family homes (down 19 percent for condos and townhomes!). Until inventory comes back on the market there will continue to be tremendous upward pressure on prices as demand outstrips supply. Where will the new supply of home inventory come from? It won’t be bank-owned properties and shortsales. The metro Denver economy is strong and unemployment is low so there will be very few distressed properties on the market for the foreseeable future. The additional supply will eventually come from home owners who finally realize what a great market it is to sell and decide to put their home up for sale. When this will happen is anyone’s guess. We’ve seen very little evidence of home owners making this realization so far, as evidenced by the continued lack of inventory on the market. Sooner or later though inventory will begin to appear. That’s your sign of a changing market. But this might take several more years which is why prices will continue to rise strongly.

Number of Homes Sold: Because there of homes sold is actually going DOWN year over year, not up. There were 9 percent fewer homes sold in June, ’15 than June ’14 simply because there is no inventory to sell. It’s the very definition of a seller’s market.

The Condo/Townhome Market: Incredibly enough the condo market is doing even better than single-family homes! Prices are up 16 percent in the past year and inventory is down 19 percent creating a blistering hot market for attached homes. Just like for the single-family home market I don’t see any evidence this will change any time soon. Until more condo inventory comes on the market prices will continue to rise. Expect strong price increases for the next several years.

Denver Mid-Year Real Estate Snap Shot
Denver Mid-Year Real Estate Snap Shot

Denver is still a great place to invest in real estate. The fix and flip market is strong for those who can find underpriced homes to buy and repair. They’re out there but it takes tools, patience, and work to find them. Once you get one fixed up, selling is the easy part because of the lack of competing inventory. The buy and hold market will continue to be extremely profitable for long-term investors. Interest rates and vacancy rates are still near record lows and rents continue to rise – a record 10.8 percent per year the past three years. It’s not difficult to buy a rental property in today’s environment and put it on the path to be paid off in 12-15 years. Just think how your life would change if you owned a couple of rental properties free and clear! For building long-term wealth it’s tough to compete with rental property ownership. That’s the one thing that will never change.

To learn more about what your home is worth, please contact me for a complementary confidential consultation! 303-807-3289


Why Denvers’ Real Estate Market is So Hot!

“How’s the real estate market?” Because of what I do for a living I’m asked this at least once a day. I love the question because it lets me talk about my favorite subject: our always-changing, ever-fascinating real estate market! There are lots of different factors and metrics I can discuss when assessing our market, such as:
1. Rising home prices
2. Overwhelming consumer demand for homes
3. A lack of inventory for sale
4. New construction not keeping up with demand for housing
5. Rental prices skyrocketing
6. The effect gas and oil prices have on housing
7. How low interest rates are continuing to make housing relatively affordable
8. What parts of town have appreciated more than others over time
9. And on and on…
But the thing I like to do most when explaining our real estate market is to show folks the chart below. A picture is worth a thousand words. Please take a look at it and begin to absorb what it’s telling us. Everything you need to know about our current real estate market is contained in this chart.

What you see are two lines, a blue one and a red one. The blue line shows the inventory (i.e., the number) of homes for sale in metro Denver every month from January 2007 to November 2014. The red line shows the number of homes sold every month. You can see that the inventory peaked in July 2007 at 30,827 homes for sale. That was at the depth of our economic and housing downturn, when fear ruled our market, banks were being shut down, our local and national economies were in shambles, unemployment was rising, and consumer confidence plummeted. The result of course was that people didn’t want to buy homes; they were afraid of the future and didn’t want to take on any risk. On the seller side of the equation, many home owners were getting caught with rising monthly mortgage payments as their Option ARM mortgages adjusted upward, so suddenly they wanted to sell, at the very worst time possible. The perfect storm.

It’s simple economics: if you have more supply than demand prices start to fall and that is exactly what they did from 2007 to 2009. Around 2010 and 2011 the market became roughly balanced, with 18,000 to 20,000 homes on the market. But as you can see the market did not remain balanced for long because the supply continued to fall.

Which brings us to today’s market. In January 2015, there were 5,152 homes on the market, 26 percent less than January 2014 and an all-time low for a January since records have been kept! This lack of inventory defines our current housing market.

The past several years have seen an incredibly strong real estate market in metro Denver and this chart explains exactly why. The supply of homes has vanished placing an imbalance in our market. No three dimensional, super fancy, econometrics model can do a better job of explaining the imbalance in our market than this simple chart.

It’s interesting to see that while the blue inventory line has dropped dramatically the past seven years, the red number of sold properties has barely inched upward, even though our population continues to rise about 1.5 percent per year. This tells me that our demand for housing is going to stay very strong for the foreseeable future.

So, how do you use this information? It depends, of course, on who you are and what you’d like to do. Here’s a brief sample.

If you own a home and are thinking of moving: It’s an incredible seller’s market and you can expect to get top value for your home. You’ll need to consider the purchase of your next home though, and make sure you have planned the process correctly so you find the home of your dreams and make the transition from your current to future home seamless.

If you are renting: Rents continue to zoom upward to all-time highs so you might want to get out of the rental rat race and buy a home. Inventory is low so you’ll need to make sure you’re prequalified to buy a home and come across as a serious buyer, otherwise sellers won’t even consider your offer. But because inventory is still so low we expect prices to continue to move up for several years, at least until the inventory balances with the demand. So you can expect appreciation in your home purchase for the next several years.

If you’re considering buying rental property: There’s no better way to build wealth than owning rental properties for the long term. Home prices have risen, but so have rents, and interest rates remain at record lows. Smart investors don’t try to time the real estate market; it’s as difficult to do as timing the stock or bond market. The vast majority of Americans who have built wealth as real estate investors have done it buying rental property and having their tenants pay it off for them over time. It’s not complicated and it works.

Of course, everyone’s situation is unique. If you want to talk about how best to take advantage of our real estate market and see what it can do for you please give me a call. I love talking about the real estate market!

Big Updates in the Lending World

Ever since the mortgage meltdown of 2008, it seems like it has been impossible for buyers to qualify for new loans. Following the 2008 crisis and well in to 2011 it looked like every lender required 20 percent down, excellent credit, and outstanding income in order to qualify for a new loan. Most buyers felt they would never be able to meet these requirements. However, the most recent three years have started to bring some flexibility back to the mortgage market. More specifically, we’ve seen some outstanding developments over the last six months that are really exciting for buyers:
• FHA reduced their annual mortgage insurance fee by 0.5 percent. This equates to a savings of $80 per month on a $200,000 home.
• The minimum down payment for conventional loans has been reduced to only 3 percent. This means you can purchase a $200,000 home with as little as a $6,000 investment.
• New down payment assistance programs provide either a grant or a repayable second lien for the majority of the down payment, requiring the borrower to contribute as little as $1,000.
• Investment property loans are available with as little as 15 percent down, allowing many smaller property investors to get back into the market.

If you’re considering buying a property and haven’t been prequalified yet it’s worth your time to speak with a loan professional and see what they can do for you. Ready to get started? I can introduce you to a fabulous lender.

I’m looking forward to “Helping You Create Your Life Story!”

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