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September 23, 2018
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September 27, 2018

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1384 W 67th Ave, listed by LIV Sotheby’s International Realty for $500,000

In most cities across the country, home prices have reached, or are approaching record values, while mortgage default and foreclosure rates are at or near record-lows. National homeownership rates continue to gradually increase to (+/- 66%). Some of the top markets in the country include San Francisco (and much of California), Dallas, Seattle, Portland, Boston, and of course Denver. These markets have been relatively hot but are not “overheated” and are not peaking. However, there is likely to be a gentle slowdown as interest rates creep a little higher over the next year. The potential easing of the market will not be due to weak buyer demand, but from an insufficient supply of homes for sale, coupled with increased home prices.

There is no economic housing bubble that will burst in the foreseeable future…period. The housing crisis of 10 years ago was due in large part to extreme over-building and lenders who could not define “creditworthiness”, originating mortgages to anyone with a pulse. Today, prudent policy reforms have strengthened lending guidelines, and the construction industry is only supplying 50-60% of needed new home construction. Slower price growth will help create a healthier more balanced market in Denver and across the nation. Buyers will begin to have more options while gaining a little leverage. Sellers will show a little more flexibility as it will begin to take a little longer to sell a home in the next year. According to NAR, 39 of the 45 largest markets have seen increased price cuts this year as sellers believed they could sell their home for inflated values. As a broker, it is sometimes challenging to help sellers price their home at fair market value, in other words, in line with what comparable homes have sold for. Too often, sellers prefer to list it “for sale” commensurate with “unsold” over-priced nearby homes. They are “hopeful” but not realistic.

In late August, The Denver Post ran an excellent article in the business section titled “Housing prices in Denver are high, but so is the return”. The analysis found the median investment (return) for homes was 8% nationally over the past year. Of the 100 largest metro areas, the annual return was anywhere from 2% – 14%. Denver was 6th on the list with an 11% return.

Research by LIV Sotheby’s International Realty states the average sales price of a home in Metro Denver (condo/single-family) is $465,000 year to date. BTW, the average price of a Denver home 35 years ago (1983) was $80,000. For the sake of the conversation, and easier math, let’s say you’ve decided to buy a $500,000 home. You have a down payment of 10% ($50,000) and will get a $450,000 loan. The annual value appreciation in Denver has averaged close to 10% over the past 5-6 years, but we shall use a modest 5% appreciation factor for our example. Homeowners in 2017, stayed in their home an average of 10 years, according to NAR. Using that time-frame your home would be worth 50% more (10×5%), or a $250,000 increase. That is a 500% increase (ten times) your $50,000 investment. By just making monthly payments (still low interest rates), you will have also reduced your loan by $50-$70,000 and you may also deduct property taxes and significant mortgage interest. Best of all, I hope you enjoy and appreciate living in your own home.

As reported by LIV Sotheby’s International Realty, the Metro Denver market has increased its average sold price by a solid 9% in the last 12-month period. The surprise is that the number of total sales was down 3%, primarily due to available inventory levels being “down” one percent. The luxury market continues to be quite healthy, but with a different focus. The amount of properties sold was up 26% over the prior 12 months, with inventory (new listings) 12% higher than last year, however, prices remained relatively stagnant. It is no surprise that Colorado ranked #1 in “Best Economy” by financial site 24/7 Wall Street.

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