As summer vacations end and interest rates continue to climb, the Denver market remains unpredictable, according to the Denver Metro Association of Realtor’s Market Trends Committee.
Would-be buyers and sellers are weighing the "golden handcuff" dilemma. They love their historically low interest rates on their home, but no longer love their home. To give some context, 91.8 percent of mortgages in the U.S. are under six per-cent, while 82.4 percent are under five percent. To showcase this current issue, new listings were down 15.33 percent month over month and down 24.76 from this time last year. Conversely, active listings at month-end were up 3.76 percent month over month, showcasing a slight increase in inventory.
Inventory aside, many would-be buyers are in a position where they need to sell their home first before purchasing a new one. As a result, contingent sales, which allow an individual to purchase their next home with the caveat that the purchase is contingent upon the sale of their current home, are on the rise. In a landscape with market uncertainty, contingencies allow buyers some confidence purchasing a new home. Saying that, sellers are more willing to accept contingent offers today as they realize the market is shifting, and ultimately, want to sell their homes.
It is important to note that we still have a lack of inventory, and while demand is slowing, we are still in a seller's market for many of the price points we cover, with the exception being $299,999 and below and $1.5 million to $2 million+. I think it's a testament to sellers willing to bend since pending sales were down slightly at 1.73 percent from last month and 2.58 year over year. Closed sales were down 16.34 percent month over month while they were down 18.47 percent year over year.
Buyers who do not need to sell to purchase their next home are looking at 2-1, or other temporary buy-down programs, to help alleviate interest rate woes. These loan programs are attractive because they reduce the current interest rate for two years before the original rate at application applies. The general prediction is that interest rates will go down within the next year, allowing these borrowers to refinance to a lower rate which helps buyers purchase now as opposed to sitting on the sidelines.
Regardless of loan programs and willingness to negotiate from sellers, buyer activity continues to slow as rates increase.
They are rate and budget conscious, looking for a good deal. Buyers are more confident offering under the list price and asking for seller concessions to help buy down their interest rate even for new homes hitting the market. Consequently, seller concessions increased from 29.2 percent last June to 48 percent this June, averaging $7,295. This may be the best time to buy in recent history as buyers can finally negotiate after enduring years of a strong seller's market. In fact, the close-price-to-list-price ratio dropped below 100 percent in recent history to 99.88 percent market wide, 99.93 for detached and 99.76 for attached. The biggest tip for those shopping for homes? Look at homes that have been on the market for 30 to 60+ days. These sellers want to sell and have very likely dropped the list price a few times.
There may be some light at the end of the tunnel for those of us who thrive on a predictable market. Historically, July and August are slower months with a rebound occurring in September. Since the spring market was a bit of a bust, are we in for some delayed gratification with a stronger fall?
Learn more about the market from the Denver Metro Association of Realtors.
Thank you to our partners at the Denver Metro Association of Realtors for compiling this information.
If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.
