I was selected to the DMAR Market Trends Committee by my peers in January 2022. This article appears as it was published under “Expert Opinions” in the April 2022 DMAR Market Trends Report and focuses on the Premier Market segment, covering homes sold in that month between $500,000 and $749,999. You can download the full report via the link above.
The Cost of Waiting
The Denver real estate market heats up with the local weather, and kick-off is right after the Super Bowl. This year was no different for the Premier Market, with 1,887 homes closing in March and another 2,442 new homes being listed, up 28.98 percent and 42.56 percent over last month, respectively. For the year, inventory in this segment is now ahead of last year’s pace by 30.01 percent, another good sign as we head into peak season.
This bump provides much-needed relief for buyers starved for inventory, especially in a segment that represents the highest sales volume (42.56 percent of homes closed and 40.6 percent of new listings across all segments in March). Even so, it remains a strong seller’s market with fierce competition amongst buyers. With most homes going under contract within the first weekend of being active, and closing at $38,007 (106.63 percent) over list price on average, buyers must still act fast and have the cash available to write offers with appraisal gap coverage.
Over the past year, the Denver Metro housing market has appreciated by nearly 20 percent. This month, 10.29 percent more homes closed between $500,000 and $749,999 than the same month last year. Buyers are feeling squeezed by this shifting, higher priced market as they are with interest rates, which increased steadily over the first quarter of 2022. Within the Premier Market, a shift of one percent can mean an impact of $50,000 to $75,000 in buying power, depending on money down among other factors.
What does this all mean for the buyer weighing sitting out versus pushing forward with their home search? The easy thing to do is to look at the competition, escalating prices and increasing interest rates and want to wait it out or throw in the towel. Is it too costly? Well, waiting can be even costlier.
While the market may not continue to appreciate at this rate, leading indicators and history show it will continue to appreciate over time. Buyers can benefit from riding this wave if they are able to adapt with the market. As an active buyer myself, I decided to lower my price point and the size of the home. In a year, I can opt to rent my home while I buy a new one. After two years (to reduce tax impact), I can sell and trade up for a bigger space, leveraging the equity gained in the home. Or, I may decide I love it just as it is and stay put.
My approach works for my situation and is one of many possibilities – the key is to find the right strategy that works for the buyer. Purchasing a home and growing equity unlocks opportunities for wealth building that other investments simply cannot offer. Sellers benefit today and the savvy buyer can benefit for years to come.