DENVER housing market – Denver real estate is expensive and it just keeps getting more so, which has many people asking: Are we in another bubble that’s about to burst? The quick answer is No, here is why.
Since the last housing bubble burst with the great recession in 2007 or so, Denver's economy has recovered better than most cities its size and home prices have increased by 60 percent on average, with some neighborhoods closer to 200 percent. The average sale price of a home in the Denver area was $439,161 in April, a new record high that puts home prices at 40 percent or more above pre-recession levels.
There’s no bubble or anything like that.
Though home prices have been quickly rising, we’re not seeing some of the other warning signs that were present before the housing crash 10 years ago. We’re a very healthy market, The underlying fundamentals of the market are different today versus then.
One major difference is the number of foreclosures. Denver saw a slight uptick in the number of foreclosed homes last year, but we are still far below what we saw at the height of the housing crisis. In 2007, for example, Denver processed more than 8,000 foreclosure cases. Last year, that number of Foreclosed homes in the Denver area was just about 720.
We’re looking at financially healthy homeowners, The number of properties in jeopardy of being potential foreclosures…it’s just not there.
Even Though we’re NOT in a bubble, there are some signs that the market will stay the same for a while. The number of sales that make it to closing is down year-over-year and There is an increase in the number of buyers who back out after a home goes under contract. Many agents may be writing many offers at above asking price before going under contract making it frustrating just getting a home. While the buyers are looking the homes just keep on going up in price with bidding wars. Some areas are going up 10% in a month.
A big reason for that is the high prices in the market right now and the fact that there just aren’t a lot of homes to choose from. Buyers often have to settle for homes that don’t have everything they want or need. These buyers are smart knowing that they will gain equity enough to get the home they want in a few years with those renting may never be able to afford a home.
Increases in home prices are outpacing income growth in the metro area and that trend simply isn’t sustainable, as home ownership gets further out of reach for many people. Kenna Real Estate has many buyers that waited for prices to come down and now they can not afford to buy a home.
Most Denver Realtors in the real estate industry are hopeful that Colorado’s construction defects bill, which just cleared the legislature this week, could relieve some pressure and bring the market down to a more sustainable growth rate of 4 to 5 percent.
The law as it currently stands makes developers reluctant to build new condominiums because of the risk of a lawsuit if something goes wrong. Many developers opt to build rental units instead.
The price of a condo tends to be less than a single-family home – currently a median of $270,000 for a condo, compared to $420,000 for a single-family home – so building more of them could help with the inventory shortage in the lower price ranges. First time home owners now have to start with a condo.
We have a housing shortage and we have a real problem especially in the lower end. We need more affordable housing and we need developers to build more entry-level product. This is unlikely since most builder start in the low $400s. After the lot and upgrades a low end new home is in the high $400s to the low $500s
The construction defects law passed both the House and the Senate and now awaits a signature from Governor John Hickenlooper.
My suggestion is that you need to buy a home now and get in the game. This home will increase in value so in a few years you can use your equity to buy your dream home.
Contact Me now to and start building equity.
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