The Current Market
Going into the current crisis we were moving back into a strong seller’s market. Buyers have been very active the first two months of this year while available inventory has remained low. The health crisis and financial impact came about very quickly, yet the real estate market did not simply go off a cliff. Over the last week we have seen new properties coming onto the market and homes going under contract. The market has changed, but does not appear to be in a freefall.
Prior to the coronavirus outbreak, mortgage rates dipped to record lows, creating a wave of new loans and pushing many lenders to the limit of their processing capabilities. On Sunday, March 15th, the Fed held an emergency meeting and dropped bond rates to near zero percent. Keeping in mind that the Fed rate is not tied to the mortgage interest rate, mortgage rates went up a full point over the following week.
The increase was the lender response to the tidal wave of new loans. Through supply and demand, the lenders needed to moderate the flow of work coming in. The increase in mortgage rates was the valve that slowed to flow of new loans.
The other important item to remember, the Fed bond rate was held at zero percent from 2008 through 2015. The drop to near zero last week was not unprecedented.
The Current Outlook
The Denver real estate market has been vibrant through the first part of Q1. Even with an uptick in new listings, inventory remains low and buyers are still making offers on homes. The new Denver stay-in-place order imposed by Mayor Hancock allows for real estate activities, but will likely slow real estate activity for the next few weeks.
Once we have passed the health crisis and the economy begins to churn again, the real estate market should come back quickly. Heading into Spring, we are just moving into “real estate season”, the busiest time of year for home sales. Both the economy and real estate market were strong three weeks ago, so hopefully this is simply a pause before getting busy again.
The biggest concern to keep in mind will be the ability for buyers to secure a mortgage loan in the coming months. If people are losing their jobs or missing key payments and affecting their credit, their ability to get home financing may be in jeopardy. The inability for buyers to get financing is potentially the key concern in real estate. The sooner we are able to get through this crisis, the better our situation moving forward. The market has been strong for many years and has the opportunity to continue even after this crisis. For today, our focus should be on taking care of our family and friends to get through this unprecedented time, while we look forward to getting past this crisis and back to work.