My Interview on CPR - Why Is Denver's Housing Market Still On Fire?

Below is my recent interview with Mike Lamp on Colorado Public Radio, click the link and the "Listen" button near the top for the audio version.

http://www.cpr.org/news/story/why-is-denvers-housing-market-still-on-fire-supply-and-demand

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Why Is Denver's Housing Market Still On Fire? Supply And Demand

It's spring. The days are longer. The daffodils are and cherry blossoms are blooming. And real estate agents are about to get a whole lot busier.

Spring is normally a busy home buying and selling season, but there's nothing normal about Denver's real estate market, which is still rocketing along. The question is, why? Charles Roberts is a long time metro area real estate agent, who has been tracking the latest trends. He spoke with CPR's Mike Lamp about a few of his ideas.

The inventory of existing homes for sale is at historic lows. What’s driving that?

It’s basically supply and demand. If you look at the charts, what you see is that we’re seven years past our downturn. We peaked, and then we were down for a couple of years, and for seven years our market has been coming back because we have a lot of people that want to live in the metro Denver area; it’s a very, very popular place to live. So the demand is going up, especially with young people. And supply is just not up, we have more building than we had during the downturn. But it is simply not keeping up.

Why is supply not keeping up with demand?  

What the builders would say is that it is relatively difficult to get loans, and they simply can’t build housing that anybody would consider affordable. So what you see is a lot of building going on, a lot of construction downtown. But that tends to be luxury building. So nobody is building $180,000 condos or $220,000 houses. It’s just unaffordable for the builders, they say, to do that. So they’re not doing it, and therefore that demand is not getting satisfied.

What is your advice for potential buyers then?

Well, if they’re looking at the lower end, it may be to move out of the city, it may be to get a two bedroom instead of a three bedroom, it may be to get a fixer upper, it may be to wait a little longer and put more money down. The people who are suffering are the folks who are renting with rents having also gone up for seven years in a row. Fortunately interest rates are still relatively low. But I don’t have a lot of really good advice because I don’t expect this market to peak anytime soon.

People are stuck in their homes because they can’t find a place to buy. Is the same true for people who want to sell?

Three or four years ago we were a little bit confused as an industry. We said people should just sell their homes because they have lots of equity and move into another home and we thought a whole bunch of supply would come on the market. What we found was that we were wrong. Someone with a $350,000 home couldn’t find anything to move up to, and the same thing in other price brackets. To be honest it’s hard to figure out how that’s going to end.

Is there a danger that there’s going to be another housing bubble?

Yes. Will the market turn at some point? I’ve got to believe it will. Will it be next month or eight years? I don’t know, and I wish I did. If you push me I’m going to tell you I think it’s going to be years out, at least three to five years, only because we can’t see anything changing the dynamic of the market right now.

Are you finding clients who are priced out of living in Denver?

We actually have seen that. And that’s very tough. And so one of the questions would be, would people simply stop moving to Denver? Will, some people be priced out, and have to move out of state? Yes, but the experts, who I do believe, because they are very good at what they do, think that our population will continue to grow for the foreseeable future which makes me continue to be bullish for our real estate market. Unfortunately it’s very very tough for people at the margin, whose rents are going up 10 percent a year and who are having a hard time finding a home.

Our very special Denver real estate market... as told by the media!

These are very special times in the metro Denver real estate market. Home prices are up, rents are up, inventories of homes both for sale and rent are low and our future outlook continues to look great. We talk about some aspect of real estate every month in this Newsletter but sometimes I think it can be hard to realize just how terrific our real estate market is without taking a step back and looking at the big picture. A great way to do this is to check out the recent press headlines and review the real estate news about our local market. In a word, it is amazing!

Denver back at No. 1 for home-resale price gains

“After trailing San Francisco for year-over-year home-resale price gains in July, Denver tied with the California city for the top spot among 20 major U.S. metro areas. For six of the last eight months, metro Denver saw the biggest one-year gains out of 20 major U.S. markets in the price of detached single-family homes, according to monthly data from the closely-followed report series from S&P Dow Jones Indices and CoreLogic. Other than Denver and San Francisco, no other metro area out of the 20 tracked in the Case-Shiller report series scored double-digit percentage year-over-year price gains. Denver's Case-Shiller home price index reached an all-time high of 172.82, topping July's reading of 171.31. An index reading of 172.82 means that local home resale prices averaged 72.82 percent higher than they were in the benchmark month of January 2000, according to the Case-Shiller report series, based on non-seasonally-adjusted data.”

Denver Business Journal

10/27/15

Denver County home sellers make out big in Q3

“Home sellers in Denver County made out big in the third quarter, where sellers sold for an average of a 41.5 percent gain over what they originally paid. That's according to research conducted by California housing data company RealtyTrac, which placed Denver County at No. 6 in the country for highest percentage sales gains. In September, RealtyTrac said Denver home sales were on pace to set a 10-year record, and median selling prices in Denver set an all-time high this summer.”

Denver Post

11/5/15

 

 

Condos appreciating more than single-family homes in Denver

“Condos in Denver have appreciated nearly 20 percent over the past year, which is nearly four times the national average and well above the single-family home appreciation rate in Denver. According to Seattle online real estate company Zillow, single-family homes in Denver have appreciated 15.9 percent over the past year, while condos have appreciated 19.7 percent. The yearly 15.9 percent increase in Denver single-family home appreciation was the biggest jump in the country while the 19.7 percent annual increase in condo appreciation was the second-biggest jump in the country, trailing only the Dallas-Fort Worth area, which recorded a 20.1 percent annual increase in condo appreciation.”

Denver Business Journal

10/27/15

 

 

 

How does Denver rate among nation’s best places to own a home?

“Where's the best place in the country to own a home? Right here in Denver, according to a new report. Porch.com and Redfin created the new list, based on a survey of about 10,000 U.S. homeowners in 67 markets, and using criteria including: healthy living, commute, climate, educational opportunity, economic opportunity, resident satisfaction, walkability, security and safety, real estate confidence, and tax fairness. Denver did the best, ranking No. 1 in the country, in the categories of health living and climate, and coming in No. 2 in resident satisfaction.”

Denver Business Journal

11/9/15

 

A small Colorado city is rated 2nd best in U.S

“There's a city in metro Denver where housing costs are affordable, home-ownership rates are high, cost-of-living is comfortable, education and health care are sound and quality of life ranks high. And that place is Littleton — the second-best small city in the U.S., according to a new WalletHub study.”

Denver Business Journal

11/3/15

 

 

Metro Denver city named one of 5 best places to live

“It wasn't but a few days ago that a new study named Littleton the second best small city in the country. And that place is Littleton — the second-best small city in the U.S., according to a new WalletHub study. Centennial is the No. 4 best place to live in America, according to a new 24/7 Wall St. report that uses data from 550 U.S. cities with populations of 65,000 or more to determine the best.”

Denver Business Journal

11/6/15

 

 

Denver real estate market growth is fourth highest in U.S, says new report

“The Denver area residential real estate market experienced the fourth-highest increase in a new housing report. The Freddie Mac Multi-Indicator Market Index (MiMI) uses four indicators to track an area's residential real estate growth, including home purchase applications, payment-to-income ratios (changes in home purchasing power based on house prices, mortgage rates and household income), proportion of on-time mortgage payments in each market, and the local employment picture.”

Denver Business Journal

10/26/15

 

 

Landlords will love this: Denver is 4th-best city in US for owning rental property

“With its rapidly increasing property values, low vacancy rates and good long-term job prospects, Denver is the fourth-best market in the country to own rental housing real estate. Denver ranked high in categories such as vacancy rates (4.3 percent), property appreciation (11.61 percent), and job growth (2.94 percent). "Denver is once again one of the best housing markets in the country to own rental properties in, leaving All Property Management puzzled as to why it doesn't receive more national recognition as a real estate powerhouse," the company said in the second-quarter report.”

Denver Business Journal

10/28/15

 

 

Denver is No. 2 in the U.S. for real estate investment

“If you're looking to make money investing in residential real estate, look no further than Denver. That's because Denver's ranked No. 2 in the nation when it comes providing the best returns on residential real estate investment, according to a new study by online real estate company BiggerPockets. Residential real estate prices increased a staggering 13.4 percent year over year across the Denver metro region," BiggerPockets said in its report. It's been well documented in the Denver Business Journal that Denver's residential real estate prices this year have increased greater than any other market in the country.”

Bigger Pockets

10/15/15

 

 

Foreclosures: Colorado bucks national trend, sees big drop in filings

“If you are looking to buy a home in Colorado, the housing market had another squeeze in the third quarter with a drop in the number of foreclosures. That's according to RealtyTrac's latest Foreclosure Market Report for the state. Colorado, which ranks No. 37 among the states for foreclosures, had a 17 percent decrease in the number of foreclosure filings from the second quarter of 2015 and is down 15 percent from the same time last year.”

Denver Business Journal

10/15/15

 

 

Denver apartment, single-family home rents keep rising in September

“It's quite clear that rents in Denver have risen greatly in the past year, but by how much? Let's just say that Denver's in the top 10 in the country no matter who you ask and no matter what you're renting. Over at Altisource Portfolio Solutions S.A., its data released on Monday indicate that in the third quarter that ended at the end of September, the rents for single-family homes in the Denver Metropolitan Statistical Area rose 14.6 percent from the same quarter a year earlier. Denver's 14.6 percent rise for single-family house rents was the eighth-biggest jump in the country.”

Denver Business Journal

10/19/15

 

 

Single-family home rents hit new high in metro Denver

“Apartment rents in metro Denver might be on a tear, but single-family homes rents are rising even faster, according to a report from Real Property Management Colorado and RentRange. The average monthly rent on a single-family home with three bedrooms in metro Denver reached $1,998, a 13.9 percent increase from the third quarter of 2014 and up 6.7 percent from the second quarter.”

Denver Post

10/7/15

 

 

Denver is sixth-hottest US commercial real estate market: Report

“Denver is the nation's sixth-hottest commercial real estate market, according to a new report. Colorado was cited in the latest report for making important infrastructure improvements: "Public financing is a tough sell. Yet it can be done, as Colorado has demonstrated in passing bond referendums repeatedly." The report continued: ‘Denver has taken advantage of a location and a culture that are attractive to a qualified workforce and exposure to growing technology industries. ... The overall outlook of good to excellent is led by a strong perception of investor demand, the strength of the local economy, and capital availability.’”

Denver Business Journal

10/8/15

 

 

 

 

 

 

 

 

 

 

How to work in a strong seller’s market!

I’m frequently asked where the real estate market is headed and when we will get back to some kind of equilibrium. The truth is it’s extremely difficult to accurately predict the future but here’s what I know: Right now we are experiencing one of the strongest seller’s markets in our history and we’re a full six and a half years into this market recovery. The reason is simple: we have much more demand for homes (buyers) than we have supply of homes (sellers). What’s fascinating to watch is the dynamic build on itself. It looks something like this: 1. Buyers make offers on homes and continue to lose out to higher offers. 2. Buyers get increasingly frustrated and begin to get more aggressive with their offers. 3. The momentum builds on itself until we see what is occurring today, with multiple offers on a property the norm rather than the exception. 4. The multiple offer dynamic almost always bids prices higher than the original asking price. 5. The buyers that lose the bid learn from the experience and become more aggressive on their next offer. 6. Then back to Step 1, until the buyer bids high enough on a property to finally get an offer accepted. The result of course is the tremendously strong seller’s market we have experienced for the past several years. And this seller’s market is not going to change any time soon, at least not until we get back to some kind of balance in the market between buyers and sellers. I don’t see that happening for at least several more years. In the meantime, if you’ve thought about selling your home, now might be a great time to find out what the market is like in your neighborhood and see what your home is worth. It’s almost certainly worth more than it was just a few years ago. Drop me a line and I’ll put together a professional Competitive Market Analysis on your home so you have the data to make the right decision. Another question my potential sellers often ask is if they sell today, can they find a replacement home in time to move? In a market like ours this is a very good question. Fortunately, there are a number of things savvy sellers can do to take advantage of the seller’s market and put themselves in a good position when looking for their replacement home. Here are a few: 1. First and foremost, work with an experienced agent to write a strong, professional offer on the home you want to buy. In a dramatically competitive market like we have now, weak, poorly written, unprofessional, and bad offers just aren’t taken seriously. There is both an art and a science to writing a strong offer. Call me and I’ll explain more about how to write an offer that has a great chance of getting accepted. 2. Add a contingency clause to your contract to buy another home. The clause would say that you will close on the home you are purchasing once your own home sells. The problem with this is that it somewhat weakens your offer as many sellers don’t want to accept a contingency when they can sell quickly to the next buyer. But occasionally we do run across a seller that is in no hurry and is happy to wait for the buyer’s home to sell. 3. Lease the home you just sold from the buyer for a period of time while you are looking for your new home (this is called a lease back). Some buyers do not want or are not able to move into their new home immediately and this permits them to earn rent from you for the period of time you are shopping for your next purchase, a win-win situation. 4. Look into a new construction purchase. Builders are building as fast as they can in this market to keep up with demand and there may be inventory of completed or soon-to-be-completed homes that could suit you. 5. Arrange to stay with family or move into short-term rental housing until you find your next home. While not a perfect solution I believe it’s far better to inconvenience yourself for a short period of time than to settle for anything less than your dream home!