2021 was an insane year filled with some of the most vicious bidding wars in the Denver housing market’s history. More homes were purchased in 2021 than in any previous year (63,684). Buyers offered large sums over asking price in an attempt to seal the deal. In fact, at Hatch alone, we saw an offer come in at over 30% above asking on one of our listings! Last year, buyer frenzy was driven by many factors. These included historically low mortgage rates and newly-acquired locational freedoms brought about by COVID work-from-home policies. Buyer demand outpaced supply in the Denver housing market by a margin not likely to self-correct anytime soon.
So the big question as we head into 2022 is: Are buyers looking at a repeat of last year in the Denver housing market?
Inventory is still low
As of the beginning of January 2022, there were only 1,477 active properties on the market in the entire Denver Metro area. For comparison, this is 11,175 fewer houses than normal. That’s 41.87% less than there were at the same time last year. The population in Denver is rising faster than the nationwide average. Denver grew 17% in the last 10 years – that’s 420k new residents. Leading the influx charge are millennials: Denver is the second most popular area amongst millennials (out of the top 100 largest metro areas). As a result, inventory actually hasn’t met housing demand for nearly 10 years, either. We can expect double-digit appreciation again this year. Back-to-back years of double-digit appreciation haven’t been seen since 2015-2016.
The construction industry is still struggling
Between rising material and labor costs, extreme material shortages, and slow city permitting processes, new build homes are taking much longer to complete. Oftentimes, sacrificing preference in exchange for timeliness becomes the only way to get things done. A buyer asked one of our developers to swap a Thermador range for a Wolff range. We had to tell them “no.” This was because delivery times for the Wolff range were booked out 6-10 months. In fact, some material suppliers are running so low on products that they are starting to only sell to the big builders like Richmond, Lanar, etc. This is being done in effort to protect their relationships with their larger clients. But as a result, it’s causing smaller builders to rethink certain materials being used in their homes.
Changes in Loan Limits
Conforming loan limits have increased to $684,250 in the Denver Metro area. By comparison, that’s $37,050 higher than the nationwide conforming limits. What does this mean? The majority of buyers can now purchase a home up to $750,000 with 10% down without it turning into a massive loan. And while that’s good news for buyers, it’s also likely to perpetuate the upward trend of overall asking prices.