The recent drop in interest rates have local lenders hustling to handle the influx of homeowners wanting to refinance. When it seemed like the re-finance boom was over, the Fed’s tweak to rates brought it back to life. Yet with all of the activity in refinancing, it hasn’t spilled over to the purchasing side. The lower interest rates have had little effect on Denver home sales.
This is somewhat surprising to local real estate agents. A market shift and rate drop should equate to a prime buying opportunity. But where have the buyers gone?
A Buying Opportunity
Agents are seeing it in Denver first-hand – plenty of sellers coming to the table and ready to list, yet buyers don’t seem to be as prevalent. Inventory continues to rise while pricing begins to soften. With school back in session we have concluded another real estate selling season. Typically, the market slows as we start the final months to the holidays and end of the year.
Buyers should take advantage of this transition time. With increased inventory and a decreasing number of active buyers, the ones who are still shopping have a more choices and bargaining power. Even with home prices rising year over year, sellers need to sharpen their pencils and come to the market with the right price.
Prices Near the Top?
Since 2013 both local and national markets have seen continual price increases, some years topping ten percent jumps in home values. As the market has made a clear shift away from the extreme seller’s market, rising home prices have slowed, but we still see an overall increase in price year over year. According to a recent Denver Post article by real estate writer and analyst Aldo Svaldi (Home sales decline continues in metro Denver in August), detached single family home prices dropped 1.1% from July to August, but were still up 4.5% from the same time a year ago.
At first glance it would seem counterintuitive that prices continue to rise. If the market is shifting, inventory is increasing, and sales are slowing down, how can home values continue to increase? The answer is demand. Although the market is changing, there is still ample demand for housing. The extreme seller’s market is gone, but we have yet to arrive at a balanced market, especially in homes under $400,000.
The Economy Jitters
The national economy has been booming, even in light of potentially damaging issues like the trade war with China. Globally the United States is the leader on the economic front, which trickles down to our local market. Colorado continues to be one of the most desirable places to live, but this strength has lead to cost of living increases that has begun to push people out of the state.
Even with the bold economy, there is a sense of uneasiness and uncertainty across the country, which still affects strong markets like Denver. While an economic crash seems unlikely, people appear to be waiting for the economy to take a dip, putting some buyers on the sideline.
And the Outlook is…
Thought leaders in the local real estate market are being very clear; the market is shifting and we aren’t done yet. There has been a definite move away from the extreme seller’s market and will likely continue to come to a balanced market. Whether we continue into a full fledged buyer’s market is difficult to say. Bigger changes in the national economy would have to come into play. For now, the economy is strong with no signs of impending doom. Sellers are still in the driver’s seat, but buyer’s are gaining more control.