This past year, the Denver market has been in flux. However, in the past month or so, we have seen headlines foreshadowing doom and gloom. These headlines, although scary, don’t predict the true nature of Denver’s market.
While pending home sales are down almost 3% from last year, it is far from a crash. Instead, we are seeing the market cool down after a few years of the pandemic. Prices and interest rates are higher, meaning more people are holding off on leaping into home ownership. But still, demand remains high for good homes priced correctly.
Why are things slowing down now?
The Denver housing market has been breaking records monthly, so for it to finally start to plateu for the moment is expected. Another reason is buyers and sellers vacation during the summer months after the Q1 craziness – fewer people are willing to commit on closing. The seasonal buyer fatigue set in a bit early after such a fast and furious first quarter that left many buyers frustrated as many were racing to purchase before interest rate hikes.
What’s up with interest rates right now?
Yes, interest rates feel high – again, due to the pandemic and as an attempt to calm down inflation. Although the interest rate hike is the largest in almost two decades, it is nothing if we look back to the 80s, when rates almost climbed to 20%.
It could be way worse, and we don’t foresee that as genuinely long-lasting. While rates may never dip back into the 2% range, we believe they will settle. Purchasing now may be a great time to purchase without a wild bidding war while locking in a rate that you may be able to refinance when rates do drop. As much as we used to not recommend adjustable rate mortgages, depending on your purchase horizon, this may be a good option and something you may want to discuss with your lender.
When will the market see change?
More likely Q1 next year. Right now, this slight dip could be a seasonal slump in the market versus the beginning of a large crash. The first quarter of each year is usually when we see buyers start to come out of hibernation to take a crack at buying a home again. So Q1 2023 will be quite telling.
So, where are we compared nationally?
Look local – the national market is only so telling compared to Denver. The headlines keep saying inventory is going up up up. But in reality, it’s sitting at about a month’s worth. In some areas, this number is still hovering at zero. A balanced market is said to be closer to 6 months of inventory.
Despite the headlines…
There are still great homes on the market being sold and people who are still looking to buy them. As long as we have that demand, we are far from the national crash that we are being warned about. A crash that may never even come makes for a good headline. Take a breath, Denver.
