2022 Real Estate Market Update
Another year in the books! The end of the year is always a little bit of a slower time in real estate. People are rightfully focused on the holidays and there isn’t as much market activity. This always gives us a little time to reflect on the year that was and think about the year to come.
We’d like to share a few of these thoughts with you; our past clients, neighbors, friends and family. We hope you find value here and as always please let us know if we can be of service in the new year.
What are the big trends in the local real estate market going into 2022?
Home prices appreciated significantly in Denver in 2021!
Denver home prices rose roughly 16.77% year over year from the start of December 2020 to December 2021. So a home that was $500,000 to start 2021 is now worth $583,850! This is wonderful news for homeowners but it certainly causes affordability issues for new entrants into the housing market.
Real estate commissions continue to decrease.
This is the section where you feel bad for us brokers and we get defensive. Just kidding! We’ve seen real estate commissions continue to trend downward on both new build homes and resale homes. We think this is happening because of an increased number of brokers, homes are selling very fast and sellers have potential new ways to sell homes (see more on “ibuyers” below). At Focus Real Estate, we have commissions customized to fit the situation, meaning we’re happy to review your situation and structure our commissions accordingly. We think you should look at all your options and select the best value when selecting your agent. Ask your Focus agent about how you can receive a 1.5% listing agent fee when selling or a partial rebate on your buyer’s agent fee when buying!
Available home inventory is down significantly.
Available home inventory in Denver at the beginning of December 2021 was down 34.17% from the year before at this time. This historically low inventory level fosters buyer competition and inflates home prices.
Mortgage rates are still low…but expected to rise.
Interest rates right now are in the low 3.125% – 3.375% range for a 30 year fixed mortgage, which is still historically very low. But could interest rates be on the rise in 2022? Many experts predict they will rise because the Federal Reserve is likely to take actions that would cause them to do so in an effort to not overheat the economy. (meaning to slow down inflation) It seems like it’s just a matter of when, not if, the Federal Reserve will take actions that will result on the interest rates going up in 2022.
“ibuyers” and “power buyers” bring new options to buyers and sellers.
What is an “ibuyer”? It stands for instant buyer and it’s basically a company that will purchase your home all cash, allowing you to sell your home without preparing it or even showing it to buyers. While at first glance it sounds amazing, sellers need to beware offers can be low and the fees involved can be high. And what is that “power buyer” we mentioned? That’s a company that’s goal is to work with buyers to help them essentially act as a cash buyer on their purchase. The mechanics of how they do it and the costs involved vary, but for now just know that their overall goal is typically to make you, the buyer, just as strong as a cash buyer! At Focus our goal is to help you assess your options and pick the one that serves you best, so we’re happy to discuss both of these options when you make your move.
Central Park Related News:
- Home inventory is as low as we’ve seen it. We’ve been helping buyers and sellers in Central Park for 11+ years now and with just 4 homes available on the market right now (as of late December) the inventory is as low as we’ve ever seen it.
- Central Park is almost out of new build homes. After about 20 years of building homes in the neighborhood, the builders are finally running out of lots. We’d estimate there are about 250 lots left to be built out at this point. Remaining builders include Infinity Home Collection, Brookfield Residential, David Weekley Homes, and Boulder Creek Builders. Want to stay in the loop on new build updates in Central Park? Sign up at HomesInNorthEnd.com.
- Builders are experiencing supply chain and labor shortage issues. As anyone building a new home can attest, these issues are resulting in delays and materials having to be swapped out for like-kind materials during the process.
- Many builders are now building “spec” homes. A “spec” (short for speculative) home means a builder selects what will go into the home, gets the permit and starts building it before they sell the home to a buyer. Builders are doing this because it allows them to streamline their process, get an understanding of their actual costs (which have been volatile) and it allows them to better control the pace of their construction crews. We’re seeing more builders start spec homes and sell them off one by one rather than the old method of releasing say 10 lots, selling them to buyers and then starting the process from the beginning with each buyer.
Buyer “Take-Aways” from these Trends:
- Buyers in the resale home market will very likely still be competing against other buyers so they need to make competitive offers. Does that just mean paying the most in terms of price? Well that helps, but we’ve also compiled a list of ways that buyers can make their offers attractive to sellers without just focusing on price. These methods could include “escalation clauses” which kick in and raise your price if there are other offers, waived or more seller-friendly appraisal clauses, limited inspections, giving the seller the timing they want and even offer some non-refundable earnest money after home inspections. Side note: offers that have a home sale contingency, meaning you have to sell your home before you can buy the new one, aren’t typically successful. A Focus agent can help you make a strong offer without solely relying on just paying the highest price.
- New build buyers will need to stay very close to builders to get one of the “spec” homes described above when it comes for sale. We just aren’t seeing large releases of homes for sale, which gave buyers better options to choose from. Having an agent experienced with new builds that has good builder relationships will be key to buyers’ success. (😉…Focus Real Estate!) These buyers should also not expect to have much ability to customize their new home because typically everything has already been chosen by the builder.
- New build buyers will have to remain flexible and patient with construction timelines. Delays are very likely to happen and builders aren’t typically great at setting good expectations on timelines. Be patient, remain flexible in your timing and expect delays…you’ll enjoy the process much more that way! A Focus agent can help you monitor the new build and time the sale of your home at the right time.
- Interest rates are still historically low but expected to rise due to inflation concerns described above. If they rise it will affect some buyer’s ability to qualify for a mortgage, so if you could fall in that category you may want to purchase a home while rates are low and you can qualify.
Seller “Take-Aways” from these Trends:
- With home inventory rates at absolute historically low levels and interest rates also historically low it may be a good time to sell. Competition between buyers is fierce for well-priced, attractive homes and that is still resulting in very strong prices for sellers.
- Multiple buyer “bidding wars” are possible if you price your home right, have it looking amazing and get it lots of online exposure. (for example with our 360 virtual models and our Facebook Lives where we introduce our listings to the market!)
- If you decide not to sell and you haven’t refinanced your existing mortgage that is worth investigating. A Focus agent can connect you with a few of go to preferred lenders if you’d like some recommendations.
Final Thoughts:
Hopefully our market review informed you of a few of the biggest trends we’re seeing in the market. If any of it sparked questions and you’d like to chat please reach out.
2021 was another really strong year for the market, asking some to wonder how long can this bull market last? Well, the honest answer is we don’t know. (and I’d be leery of anyone that says they do!)
So it may be boring but when it comes to your housing decisions we always come back these two simple, time-tested pieces of advice:
- First, you should be a homeowner for the long haul. Real estate, like the stock market, will have its ups and downs, but in the long run it’s been one of the best methods to grow wealth.
- Second, you should own a home you can truly afford. That way, if life throws you a financial curveball you don’t find yourself in a tight spot.
If you follow those two suggestions, we think homeownership is a great path for our clients.
If you’re considering a real estate move in 2022 please reach out, we’d love to help. If moving isn’t on your radar, but you know someone who may be moving, please feel free to pass this along to them.
We hope you have a great 2022 and we’ll see you around the neighborhood.
