After an especially difficult year for would-be home buyers, there is little relief in sight for those trying to find a house to purchase along the Front Range and in high-demand Douglas County.
Home prices have appreciated at a rapid clip for the last decade in metro Denver, but 2021 posed even greater problems for those seeking to buy a home, with inventories of homes for sale plummeting to all-time lows in many areas. The low inventory led to an incredibly competitive sales environment, in which bidding wars were the norm and cash offers in some cases totaling tens of thousands of dollars above asking price flowed in.
Unsurprisingly, the price of homes shot up over the course of 2021, from a position that many on the Front Range already found unattainable. In Douglas County, the median sold price for a detached home reached $677,000 in November 2021, an increase of more than 20% from the same month a year earlier, according to data from the National Association of Realtors.
Overall, in the metro area, the median detached home price increased from $450,000 to $525,000 year-over-year through October, according to the Denver Metro Association of Realtors Market Trends Report.
Another indicator of the direction of the home-buying market is the number of homes that sold for $1 million or more, said Jace Glick, a broker-owner at Re/Max Alliance specializing in Douglas and Elbert counties.
Through November 2021, 14.2% of homes that sold in the metro area were priced at $1 million or more, compared to 7.6% in the first 11 months of 2020. Meanwhile, the percentage of homes sold in the $300,000 to $499,999 range fell from 34.6% in 2020 to 9.6% in 2021, largely because of a severe shortage of homes in the mid-tier range. Only a sliver of all homes sold for less than $300,000, a number that would have been considered average for the Denver area a decade ago.
Douglas County in particular has experienced price hikes, thanks to its reputation as a desirable place to live, Glick said.
“Our inventory levels are anemic,” Glick said. “In 2019 there were 1,031 homes for sale. Right now there are 349. That’s a third. There aren’t as many sales because people aren’t selling.”
COVID-19 certainly contributed to the problem, adding a previously incomprehensible layer of complication to a marketplace that was already short on inventory.
“COVID changed the way we think about our homes,” said Jessica Reinhardt, member of the Denver Metro Association of Realtors Market Trends Committee and a local broker. “It’s no longer just where we eat and sleep. It’s where we work, where we spend our free time, it’s where our kids go to school. Everything has been exasperated. COVID exasperated our market.”
The uncertainty and fear that the pandemic brought completely disincentivized people from selling their homes at the same time that turmoil in international markets destabilized funding for new development, throwing a wrench into the pipeline of new-build homes. Now, supply-chain problems, labor shortages and materials costs slow construction times of those homes that are under construction, Glick said.
And these trends are likely to continue into 2022, although Glick anticipates a bit of an uptick on the inventory side, particularly from baby boomers deciding to downsize or move closer to their children.
But larger economic forces are at play, impacting would-be buyers’ ability to come up with the money to chase down increasingly expensive properties.
“Inflation is the ultimate silent tax,” Glick said, referencing recent surges in inflation nationwide. “When everything you buy goes up, it’s a silent tax. It hurts people, they notice it.”
In response, the Federal Reserve has indicated that it is likely to raise interest rates in 2022, which in turn cuts into buying power for those seeking homes.
And buyers are feeling the strain, especially those who are trying to purchase a home for the first time, Reinhardt said. These buyers have never gone through this process before and repeatedly losing bidding wars or have offers rejected is defeating for them.
“Every time they write an offer, they’re invested. They’ve pictured their Christmas tree in that house somewhere,” she said.
Aside from the bidding wars, the price increases have changed the idea of what an entry-level home is, Reinhardt said. She also predicts another challenging year for buyers, particularly until the weather starts to warm up. Colorado’s residential real estate market typically slows down in the winter as inclement weather and the holiday season keep people from listing their homes.
“There will be some new inventory hitting the market, but I don’t think we’ll see that first wave until early spring,” Reinhardt said.
And even then, the number of homes placed up for sale as the winter thaws into summer selling season can’t keep up with the tremendous demand in the Denver area.
Still, it’s not impossible to buy a new home, Reinhardt said, but it’s important for buyers to have realistic expectations before they jump into the fray. That, and having a strong team in their corner.
“When I give advice to buyers, the number one thing is to have a good lender behind you. It makes a difference when you’re making an offer. Having a good lender and a realtor to advocate for them is huge,” she said.
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