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Real Estate Market Update, Colorado – May, 2013

Line graph showing trends

Everyone will likely agree that the real estate market here has shown excellent signs of recovery.  The return back to a thriving market in Colorado has not come without some challenges.

Prices have continued for months to rise year over year but now increases seem to be slowing

Real Estate Market Update

The first challenge is the inventory shortage we are seeing in many areas of Colorado.  It is widespread and the cause is easy to identify, savvy homeowners have, up to this point, seen signs of recovery and as a result, are holding out for the highest price they can get for their homes.  The pricing issue itself here has many obstacles. Including the fact that buyers are observing over-bidding practices which have recently been featured in the media; as a result, many are asking too much for their homes.  Certain specific areas and properties are very high demand. However, outside of those areas, prices remain either on a slight increase or decrease and are appraising very close to their actual value.

This is an obstacle not only for the listing agent but for a new potential buyer. Because if they will require financing, the bank will only consider the loan up to the appraised value.  Any difference over and beyond the actual appraisal will be up to the buyer to produce. Buyers who require financing often are challenged to meet down payments financially, much less pricing overage differences.

Inventory Shortage

With regard to the inventory shortage, it is not expected to recover to the levels that would be considered sustaining and healthy during this years’ selling season.  Many brokers are reporting that the amount of activity they are currently trying to manage has far exceeded what they saw pre-2006. They expect that pace will continue through the summer selling season.  Their challenge is ferreting out the perfect property for their eager buyers.  A recent top city ranking shows Denver in the top five cities across the United States for the actual time a property stays on the market before it is sold.

Denver ranks 4th with an average of 29 days – beat out only by 3 cities in California, San Francisco, San Jose, and Oakland.  This April Housing Summary from also shows Denver in 15th place. Up from 18th place in overall activity and median price changes year over year from 2012.  The bottom line on the inventory and pricing is, demand is driving prices up. Inventory shortages are expected to continue as homeowners, predominantly in the single-family home sector, are trying to wait to get as much as they can for their properties.

Interest Rate

The next challenge is where the ‘rubber meets the road’.  And that is the interest rate.  In a much-anticipated move, the Federal Reserve has mapped out changes to their monetary policy, May/2013,  and will now begin easing back from measures the took to try to enhance the economic recovery, which ultimately created the historically low-interest rates.  As a result, leading economists and financial experts expect these interest rates to begin climbing as early as the 4th quarter of this year.  Those either in the mortgage and finance industry as well as those closely connected in real estate know it. This could potentially lead to disappointed buyers. Buyers that waited or couldn’t find a property and for sellers that waited too long.

Understanding why buyers might qualify right now, based on the low-interest rate, is easy.  Understanding why sellers might be affected is a bit more complex. Sellers whose homes are likely to attract buyers that require financing may be disappointed that the buyers are no longer able to qualify for a home at their price point after interest rates begin to rise.  Even a tiny, fractional change upward can affect buyers and may make it impossible for them to qualify. As their income will not rise to meet the new ratio figures after rates go up. Along with median prices being driven higher in the hotter markets due to the inventory shortage and demand for housing.

Benefits of Having a Buyers Agent

Choose the best agentYou need a buyers agent in this market.  It takes an extensive amount of time to thoroughly research a property and show it to a prospective buyer.  If you are a buyer researching several properties at once, you may lose several properties in the time it takes you to research just one.  This is happening to many buyers who check the current availabilities first thing in the morning. They get there by 9 or 10 only to find that multiple offers have already been made on the property.

A buyers agent has the current, most up to date information. They can save you a great deal of time in your research. Sometimes many thousands of dollars in the end-game, the price negotiations.  A buyers agent represents you only and has no potential conflicts with the seller or their agent. As the seller’s agent would be working to get as much money as possible for the seller.