Unless you’ve been through the process of buying or selling a home several times, you probably don’t truly understand the complex real estate game. Nonetheless, studying up on the rules and getting to know the key factors can help you show up on game day ready to play.
No matter what city or state you’re in, there are a few main factors that unequivocally affect what happens on the playing field.
Whether the number of residents is increasing, decreasing, or even stagnant, expect changes in the market. Denver is the fastest-growing city in the United States with the population of the metropolitan area increasing by over 10% from 2010 to 2015 (according to the US Census Bureau). This has had a huge impact on the real estate market and will continue to do so for the foreseeable future. To understand why, let’s revisit a simple economic concept we all learned about at a young age. Maybe you experienced it first hand through the great Cabbage Patch Kids shortage of the early ‘80s or maybe it was when you realized the value of your cherished collection of mint-condition Beanie Babies was suddenly worth pennies on the dollar in the late ‘90s. Yes, I’m talking about the basic principles of supply and demand.
To put it simply, large supply with low demand equals low prices. This is what happened when the Beanie Babies’ bubble burst. When the buzz started dying down, collectors panicked and began selling frantically looking to cash in on their investment before it was too late. This created an abundance of merchandise on the market and high competition among sellers, which when coupled with low consumer interest led to price-cutting. Consequently, this was the beginning of the end of the Beanie Babies craze.
What’s happening in Denver right now is more of a Cabbage Patch Kids conundrum. When hordes of children begged their parents for a Cabbage Patch Kid in the early ‘80s, there weren’t enough dolls on the market to meet those demands, so prices skyrocketed. Dolls that originally retailed at $30 were selling for three times that. Low supply with high demand equals high prices. In Denver, new housing construction isn’t keeping up with population growth rates, which is creating high demand with low inventory, thus driving prices upward.
Home Loan Interest Rates
Home loan (otherwise known as a mortgage) interest rates are another factor that highly influences the health of the housing market. Though there have been a few ups and down, interest rates have generally decreased over the past 30 years. In 1986, 30-year fixed-rate mortgages came with an interest rate of around 10%. In 2016, the national average was under 4%. While understanding the complexities of what influences mortgage interest rates is a post for another day, simply knowing that levels are relatively low means people will be interested in buying, provided the economy is in a relatively stable state. Which brings us to the next factor…
Logically, if the economy is in bad shape, less people can afford to buy. If the economy is thriving, more people will buy. Colorado’s historically low unemployment rate (2.3% as of April 2017, according to the Colorado Department of Labor and Employment) means people are working. Of course, having steady income makes getting a home loan easier. High employment may not be entirely good news, though, as most industry experts agree that wages are not increasing at the same rate as the cost of living. If this trend continues, it could push people to rent rather than buy or discourage potential transplants from moving to Denver.
Know What You Want
Buyers: make a prioritized list of what you’re looking for in a home. Think through it carefully and consider making some concessions if affordability becomes an issue. Maybe a home office is a must-have, but you could live without a big backyard if you were able to get a plot in a nearby community garden or if you could take a daily walk with your dog to a park around the corner.
Sellers: get your house ready for the market by sprucing things up. Although the market is hot, homes that show well are the ones that receive multiple bids and traditionally sell at the highest price. We’ve put together a great checklist to help you get your home in show-ready condition. Keep in mind that no one knows your home as well as you do, so help your agent boast about all your home’s great attributes and gather pertinent information that will make your home sale a breeze.
Reading local publications and getting involved in the community are good ways to stay on top of new developments that could have an impact on the housing market. Denveright gives residents a voice on future city planning in areas such as public transportation and parks and recreation. Knowing what’s going on in your city, and even being a part of deciding its future, can give you a step up in the real estate market. Being aware of new developments such as the creation of parks or the expansion of public transportation lines can provide a sneak peak into future desirability of certain neighborhoods. Buy there now and watch your home value go up over the years as these new projects come to fruition. Or, use your insider knowledge to your benefit when marketing your home to prospective Buyers.
Stay In the Know
Government policies and subsidies can influence buying, selling, and new construction on a large scale. The best example of this is House Bill 1279. This recently passed bill, will essentially make taking action against builders for construction defects more difficult for condo owners. Though this may sound like a bad idea for buyers, the goal of the bill is to spur new condo construction in order to fill the inventory gap; so keep in mind how potential rising inventory may affect you as a buyer or seller (see above). Prior to this bill, there was a huge shortage of condo product on the market. This only made the supply of condos more scarce which tightened the market even more as condos are typically entry-level properties for many buyers.
Apps can be a great way to browse the market to get an idea of what you can afford, and find your ideal neighborhood. Our favorite real estate apps are Kentwood & Homesnap. The latter allows you to see loads of information on a house by simply snapping a picture of it.
Get a Realtor
No app can replace an amazing agent who knows the market inside and out from years of experience and analysis. Finding a realtor you trust will reduce the stress of buying or selling a home tenfold – have we mentioned that we have a combined 25 years go experience? We would be happy to help you with either buying or selling.
The Home Stretch
Though all of the rules, regulations, and number crunching may seem intimidating, putting in a little time and effort to keep tabs on the housing market can help ease the pressure of making the often difficult decisions that come with selling or buying a home. Come see us, fill out our contact form, or give us a call at 720-935-0412, and we’ll help you stay ahead of the game!