Denver and Colorado Markets Strong During the Pandemic
By Steve Blank
By now, most people have taken stock of how the pandemic is affecting us as individuals and as a society. Directly and/or indirectly, we have adopted new habits, perceptions, and lifestyle adjustments. The economic impacts are still being discovered as we learn new realities of how to adapt, modify, and improve our world. I had a friend who liked to say, “we’re just here for the visit, so let’s enjoy it!”
With that in mind, it’s easier to understand why the real estate market remains a positive and compelling element of our economy. Whether people need to reevaluate their housing situation or choose to improve their current living situation, COVID-19 has opened the door to some new realities.
For many, the need to create a true home-office (or two) has become a necessity. Others have a need to better accommodate parents or older children in a larger home. Some of the reasons may be due to financial considerations, family lifestyle changes, or perhaps people genuinely just want to better enjoy and appreciate their home environment. Other emerging priorities include improved and more inviting outdoor spaces, appealing spaces to watch TV and movies, and a designated room (or flex-space) that is adaptable for exercise.
The pandemic is partly responsible for a visible uptick in homeownership rate in the United States. Essentially, this rate represents the percentage of people who own their home as opposed to renting. By the end of the second quarter of 2020, homeownership rate increased to 67.9%, up from 65.3% in Q1. In 2005, prior to the “Great Recession” of 2008-2011, the rate hit its all-time high of 69.1%. That led to the rate falling to 63%, with foreclosures and short sales. The recent increase in homeownership was primarily spurred by millennials in their 30s. There is a demographic demand shift away from renting to owning a home, driven by millennials and accelerated by low-interest rates.
Based on the last recession, it is reasonable to wonder whether another wave of foreclosures might occur during this COVID-19-caused recession. Such an outcome is highly improbable. Foreclosure is a two-pronged event, requiring both an adverse economic state of conditions, and an insufficient level of home equity in properties. Today, Denver homeowners benefit from eight solid years of values increasing from 7.5% to 10.5% annually. Thus, Metro Denver homeowners can tap into their home’s equity through either a mortgage refinance or through a sale. Currently, even in the midst of this pandemic, Metro Denver values are rising at a rate more than 7%, over this time last year.
The Colorado Association of Realtors reported 10,771 single-family homes went under contract in July, a one-month record, and 21% higher than July 2019. In Summit County, 387 homes were placed under contract in July, more than eclipsing the 210 under contracts in July 2019. Nearly every Colorado mountain resort community from Vail to Telluride, and Breckenridge to Crested Butte, is experiencing record-breaking interest and sales. Much of the activity comes from the Front Range; however, contracts are coming from Texas, Oklahoma, and California, with surprising interest from Chicago, Florida, and the East coast.
It’s obvious that Denver and much of the country are enjoying a good-to-great real estate market. This may be great for sellers and a bit frustrating for buyers, who view every new listing when it hits the market. In a strong market with limited inventory, this behavior can be the single-largest obstacle for buyers to overcome when purchasing a home. If you have not been successful competing against multiple offers or haven’t found the right home; then play the game differently. Start looking at homes that have been on the market for a while. Buyers (and brokers) often assume something is wrong when homes haven’t sold quickly. There are several reasons why, including just being priced too high. Additionally, sellers with longer market times are more likely to cut a better deal. The irony is that when buyers only follow new listings, they miss some great available homes with potential improved pricing, (not to mention less competition).
There are a variety of factors that are spurring homes sales during this pandemic. Smart homebuyers … and sellers … can take this opportunity to enhance their lifestyle and make a solid economic decision.