Mid Year Market Update
Ok, so we’re a bit past mid-year, but June’s numbers come out in July!
Q: Are we entering a housing bubble?
A: All the experts are still saying NO! We still have a shortage of inventory. In Denver, we have ~1.3 months of inventory on the market and we need closer to 6 months to stabilize. Since the crash of 2008, the mortgage industry has introduced new rules and regulations for better mortgage lending and in turn, fewer defaults on those loans. Any of us that are familiar with that 2008 market may be weary, but this market is nothing like the one of 2008. While inflation is having an impact on our day-to-day spending, it is not enough of a widespread economic hardship to cause a housing bubble. Unemployment is still low. Our economy is still strong overall. People are still buying and selling.
Q: What is the 2nd half of 2022 looking like?
A: The Denver Metro Association of Realtors (DMAR) released midyear predictions. This includes a 9—11% increase in home prices year over year. They also released 5 tips for buyers and sellers:
Buyers:
Rising mortgage rates mean your purchasing power decreases slightly.
Rising home prices mean your purchasing power decreases slightly, again.
A cooling market means less buyers in the market to compete against. That’s good news for submitting offers at asking price, with full inspections, and fewer appraisal gaps.
Institutional buyers, or experienced investors, are buying properties in key counties in Colorado, creating more competition in those areas.
Inventory is up 30% from the start of the year. There is so much more to buy. On average, you need to make $100,000 a year to afford these homes. Many buyers are priced out despite the inventory.
Sellers:
Rising mortgage rates mean the market is slightly less competitive, but in June the average days on market was still only 10.
Prices are expected to rise, but not as quickly as in the last year. Your equity grows as those prices rise.
A cooling market, yes, but still a seller’s market! You need to make sure your home is priced right and you are only looking at comps for the last 30 days. 60, 90+ days are now irrelevant.
Experienced investors are purchasing more properties, providing you with more cash buyers in the market.
With inventory up so much this year, you won’t receive as many offers on your home.
A significant amount of inventory reduces after Labor Day in favor of selling in the springtime. This happens every year as students return to school, days get colder, and the weather is less favorable for showings. We can expect to see this trend in the coming weeks.
Q: What’s the deal with interest rates? Should I wait for them to go down?
A: They are expected to level at 6% into this recessionary period. This past week we saw them down as low as 4.49% with a 1% discount. So, NO, don’t wait! You can always refinance your loan later when rates go down, especially if you’ve found *the one*. They will, the market always changes. There are many lenders offering interest rate buy-downs and sellers offering credits to offset the increased cost. Homeownership will help you hedge against inflation and build your wealth. The interest rate on rent is always 100%.
