Denver Real Estate Blog
Fall is one of best seasons in Colorado. The Aspens are beautiful, the crisp air is a refreshing change from the summer heat, and the anticipation of upcoming holidays and fun is invigorating. While we always look forward to this time of year it also brings some additional challenges when you’re trying to sell your home. First, don’t stress out, there are several ways to enjoy the holidays and your home even while you’re selling it.
Decorating for the Holidays
If you are anything like us, you love decorating for the holidays. In three short months we get to go from gruesomely scary to pilgrims, and turkeys to brightly lit trees. What a great time of year to go all out and make your own holiday extravaganza. However, if you are trying to sell your home you need to be a little more conservative on the decorations.
Use fall colors, like orange, brown and other earth tones to accentuate the holidays. Perhaps put up a few of your Halloween favorites, but take the gel filled eyeballs to the office. The same goes for Thanksgiving and Christmas. While putting up a few of the kids crafts is ok, too many can look cluttered and draw the potential buyer’s eyes away from the selling points. This may cramp your style just a bit, but always remember less is more when staging your home. You want the people to see themselves in the home. For great staging tips check this out.
Water, Mud and Gunk
One of the other issues of selling your home in the fall is the abundance of moisture inherent with living in Colorado. Rain, mud, and the Denver surprise snowstorm are part of our way of life and even though we are used to it, having people track it into your home can be frustrating. Extra entry way rugs and mats are your best friends. Give people ample opportunities to wipe their feet and clean off their shoes. In some cases it can be ok to ask people to remove their shoes, but it’s always better if they don’t have to. It may make them feel uncomfortable. Have a towel near the door for quick clean ups and perhaps even buy a box of shoe covers.
If you have pets, kids, or a combination of both, the fall fun outdoors brings extra challenges. Create a safe place for them to clean up outside the home or in the garage. It is always better to endure a cold wind than scrub muddy footprints out of the living room carpet. Preparation is always the best measure. Talk to the family about what needs to be done to keep the house clean and how to keep Fido from running in covered in the outdoors. If you do find yourself in the middle of a carpet emergency, this post, “Tips For Your Mudders Carpet” will give you some good advice.
As Always Have Fun
We know it can be challenging at times to keep the house exactly the way you want it when you’re selling your home, but remember, at the same time you probably visiting homes yourself. This is always and exciting time in anyone’s life. Have fun, enjoy the moment, and don’t get hung up on the small stuff. If you ever have questions, or want a professional point of view, give us a call, we love helping people.
September may be the best time of year to enjoy our favorite city. Check out some great stuff going on in Denver this month here:
A Taste of Colorado: September 2nd to 5th
“Delight your taste buds with creations from Colorado's favorite food establishments. Enjoy appetizers, entrees, and desserts in full-sized portions with friends or in sample sizes by yourself. Discover ethnic specialties or indulge in your traditional favorites. An elegant Fine Dining Area is showcased, highlighting gourmet cuisine from renowned chefs and offering daily cooking demonstrations.” Learn more.
Brews + Views: September 3rd from 2pm to 5pm
Cheers, all you beer lovers! The 2nd annual Brews & Views Beer Festival returns to Hudson Gardens! Pairing the lush beauty of Hudson Gardens and beer samplings from over 40 Colorado breweries seems like the perfect way to start off your Labor Day weekend! Breweries from just around the corner to statewide locations will showcase their unique libations, allowing attendees to sample Colorado craft beers under a beautiful late summer sky. Tickets $25.” Learn more and get tickets.
Denver Food + Wine Festival: September 6th to September 11th
“Denver Food + Wine Festival is a multi-day extravaganza of food, wine and spirits education, promotion and tastings, presented by co-sponsors Colorado Restaurant Association and Southern Wine & Spirits of Colorado. Events include a Riedel glass seminar, an intimate wine pairing dinner, evening tasting party and the primary event, The Grand Tasting. Through these series of events, Denver Food + Wine Festival aims to highlight industry impact, promote workforce development and celebrate Denver as a culinary destination.”
Learn more and get tickets.
2016 Rocky Mountain PBS Kids Fun Fest: September 10th from 10am to 2pm
“This year’s free festival will be held at Rocky Mountain PBS Studios in downtown Denver. We urge you to bring the whole family to this fun summer event, during which we will celebrate the Denver community with a robust program of family-friendly activities and live entertainment. More than 50 local organizations will sponsor booths with activities such as music-making, art, petting farm animals, tennis, climbing wall, bounce houses, and more” Learn more.
Adventure Fest: September 17th from 11am to 8pm
“Gociety presents Adventure Fest 2016, the most immersive outdoor festival of the year! Join thousands of adventure seekers, outdoor enthusiasts, athletes and like-minded individuals as they bring the mountains to the city. Gociety will host Adventure Fest at Sculpture Park in downtown Denver. There will be a beer garden, food trucks, a climbing wall, power yoga, acro yoga, tiny home tours, field games, a pool party, giveaways, gear demos and more.” Learn more.
Oktoberfest Denver: September 23rd to October 2nd
“Denver's Ballpark Neighborhood welcomes back one of the city's longest running festivals and one of the largest of its kind in the nation! Oktoberfest Denver is set to once again commemorate this world-famous and time-honored tradition of German heritage by combining dynamic performance of music and dance, bier-based activities, Long Dog Derby and entertainment for all ages.” Learn more.
As you know from reading this monthly newsletter the best way to really understand our real estate market is to take the time to dig deep and look at the numbers. Whether you’re a homeowner wanting to understand how your biggest investment is doing, a renter thinking about taking the plunge into home ownership, or a real estate investor looking for your next opportunity, understanding the market data is critical. So, this month I’m going to walk you through the REcolorado metro Denver quarterly snapshot, explaining each entry to help you make sense of our housing market.
The columns on the top are as follows:
- Key Metric: self-explanatory
- Historical Sparklines: the data from July 2015 to July 2016
- 7-2015: July 2015 data
- 7-2016: July 2016 data
- +/-: The percentage change year-over-year
- Last Year YTD: Year to date data from Jan – July 2015
- This Year YTD : Year to date data from Jan – July 2016
- +/-: The percentage change Last Year YTD and This Year YTD
Active Listings: 8,859 down 0.8 percent year-over-year. The number of active listings has plummeted since the market began recovery in 2009. In 2007 in the middle of the downturn we had over 31,000 homes on the market – a true buyers' market. Now it’s the opposite. We had only 8,859 homes on the market at the time of this snapshot, an incredible plunge supporting our sellers’ market. If you’ve ever thought about selling, this is the type of market you'll want to sell in!
Under Contract Listings: 7,023 down 1.8 percent year-over-year. Slightly fewer properties have gone under contract this year versus last year. The very low inventory of properties on the market is keeping this number down. Until inventory returns to the market we can continue to expect the number of properties going under contract to remain low.
New Listings: 7,483 down 6.5 percent year-over-year. The number of new listings continues to drop, leading to the extremely low housing inventory in our market. Our supply/demand equation is somewhat out of whack with a huge number of buyers looking to purchase a home and very few sellers willing to list theirs. This has led to our super strong real estate market and the resulting rise in prices the past seven years.
Sold Listings: 5,192 down 19.3 percent year-over-year. This number surprises a lot of people. Everyone thinks we’re having this massively crazy up-market and lots and lots of homes must be selling, but nothing could be further from the truth. Because our inventory is so low – close to the lowest inventory per capita ever in metro Denver – there just isn’t a big selection to buy from. The result being that the number of homes sold is down, not up, and by a very significant number.
Total Days on Market: 20 same as last year. A normal market of balanced supply and demand will have about 90 days on market (which is the same as six months of inventory in case you run across that number). A stronger market will have fewer days on market and vice versa. Twenty days on market is incredibly low. It means demand is extremely high for housing and sellers are selling their homes in near record time. If you have been out looking at homes recently you’ll know what I mean. More and more often we run into other folks looking at the property at the same time we are because there are so few properties on the market. Smart buyers have learned to act quickly to get the home they want, driving the DOM even lower.
Median Sold Price: $350,000 up 12.3 percent year-over-year. The median price is the middle price of all homes sold – not the average price. For example, if five homes were sold in an area at the following prices: $100,000, $200,000, $300,000, $800,000, and $900,000, the median priced home is $300,000, but the average priced home is $460,000. Over the past 40 years metro Denver home prices have increased on average 5.9 percent per year. 12.3 percent is significantly above average, a result of a lot of demand for homes, not much supply, a strong employment market, a strong economy, etc.
Average Sold Price: $408,406 up 12.1 percent year-over-year. When the Average Sold Price is below the Median Sold Price it means that the lower end of the market is doing somewhat better than the higher end of the market, and of course the opposite is true as well. The fact that both yearly percentage changes are almost identical means the market is more or less consistent both above and below the average and median prices.
Percent of Sold Price to List Price: 100.6% down 0.2 percent year-over-year. A sign of a very strong market is when the final sales price compared to the list price is almost the same, as it currently is in our market. In a weak market, buyers will try to lowball an offer and often get the property well below asking price. But in a market like ours, sellers are getting on average more than what they’re asking! What we often call the Average Discount isn’t a discount anymore, it’s the opposite. I guess we’ll have to start calling it the Average Premium! Today, homes are selling 0.6 percent above the asking price and that percentage is almost identical to what it was a year ago. This is another sign of a strong housing market.
Colorado is home to some of the nicest people on Earth. Perhaps it’s the clean mountain air, the healthy living, or just loving the scenery, but even in a big city like Denver, we are known to be friendly and hospitable. Maybe that is why I’m so shocked when I hear stories of neighborhood feuds and brawling neighbors. In fact, we even had clients that have sold their home just because they didn’t like the people next door.
Why is the Grass Greener?
I remember as a kid there was one house on the block where you weren’t allowed on the lawn. The gentleman who lived there was quite serious and we suffered many tongue lashings and threats if we dared touch his perfectly manicured grass. Later as a teen, he asked me to mow his lawn in the summer as it had become too hard for him. I then learned that he kept the lawn perfect for his wife who when very sick, loved to look at the yard and flowers. He just wanted it to be perfect for her even after she had passed away. I admit, I worked extra hard in the following years to make sure it looked perfect and even shooed off a few youngsters myself.
It’s surprising what can make people upset. Overhanging trees, barking dogs, people parking in front of your house, or kids running across a lawn can cause even the nicest person to become enraged. Most of the time it isn’t a serious or damage causing issue that becomes the spark that lights the fire, but a simple misunderstanding or pent-up anger about something that was never resolved.
Be the Big Person
Someone has to be the big person, who talks with respect, humility, and is willing to solve the problem without becoming overly emotional. That should be you. Whether you are having a problem with the neighbor or they have a problem with you, the first thing you should do is try to talk about it. The causes of most neighbor wars are just simple misunderstandings or something that is easily corrected. Talking is always the best step before you start complaining to the other neighbors, calling the police, or going to court. You never know what you might find out, and resolving the conflict may result in lifelong friends.
Remember, this is your neighbor. Not only do you share space, you should be looking out for each other, protecting each others' children, and making sure each of you is safe. It makes no sense to battle over inconsequential things. While sometimes it makes great movies, it doesn’t make your neighborhood any happier. Click here for some good tips on resolving conflict.
We all want to be happy and love our home. Perhaps today you are sitting there looking with disdain at a pile of leaves from last fall that keep blowing in your yard, or wondering how long it will take for the neighbor’s luscious crop of dandelions to make their way to your pristine yard. You may even be grinning because you intentionally parked 6 inches closer to the dividing line just to make a point. Whatever the issues, large or small, reach out and do your best to be the neighbor you always wanted. You will be glad you did.
Looking to get out and do some fun stuff this August? Check out these upcoming events:
Denver HaHo Market: August 5th from 7-11pm
“Denver Handmade Homemade will host a HAHO market on the first Friday of August. The Santa Art District will close down the entire strip for a big summer festival all about art and food. Expect all the galleries to be open and poppin’, with live music, food trucks, entertainment, and 90 vendors.” Learn more.
Art + Ale Brew Festival: August 12th from 6-11pm
“CU South Denver’s most popular event returns for its 13th year! Indulge in all-inclusive food and drink tastings at south Denver’s longest-running beer festival. Enjoy food and drinks for over 50 local craft breweries and restaurants, love music by That Eighties Band, play cornhole and other games, and make your own art to take with you!” Learn more and get tickets.
Hops in the Hangar: August 13th from 5-9pm
“Surround yourself with iconic aircraft, cool cars and icy brews at Denver’s most unique beer festival. Wings Over the Rockies Air & Space Museum is hosting the 3rd annual Hops in the Hangar on Saturday, August 13 from 5-9PM in Historic Lowry. Enjoy beer from over 20 local craft breweries, barbecue from Jim ‘N Nicks, and much more.” Learn more and get tickets.
Denver Flea: City Park: August 13th to 14th from 10am-6pm
“A contemporary marketplace showcasing makers and retailers who cultivate the Colorado lifestyle.” Learn more.
Sleep Tight Pajama Jog: August 20th
“Sleep Tight Colorado is excited to be hosting their 6th Annual 5K Pajama Jog in Denver's City Park. Support a great cause and appear in a costume for contest prizes! The 5K is professionally timed and participants may choose to run, jog, or walk. 100% of the proceeds goes toward buying sleeping bags for Colorado’s homeless.” Learn more and get registered.
National Parks Adventure 3D (Now - September 22)
"Narrated by Robert Redford, National Parks Adventure 3D celebrates the 100-year anniversary of America's national parks by taking viewers on an off-trail adventure through four of our treasured national parks: Yellowstone, Glacier, Yosemite and Arches. Watch it in IMAX at the Denver Muesum of Nature & Science." Learn details here.
Cherry Creek Arts Festival (July 2-4)
"This free, outdoor extravaganza - the city's signature cultural celebration of the visual, performing and culinary arts - gives more than 350,000 annual visitors the chance to meet and talk with international visual artists, enjoy a wide range of family-friendly fun and sample fine cuisine." Click here to learn more.
Liberty Run and Firecracker Kids Fun Run (July 4)
"Work off all the BBQ, ice cream and apple pie by running in the Liberty Run. This four-mile run around beautiful Washington Park is a July 4th tradition in The Mile High City and benefits veterans." Learn details here.
4th of July Weekend in Denver (July 1 - 4)
"There’s no better place to be over the 4th of July weekend than in Denver! You’ll be treated to festivals, concerts, pro sports - and, of course, all the brilliant fireworks displays you could ever wish for." Learn about the many events going on here.
City Park Jazz (Now - Aug 7)
"City Park Jazz heads into its 30th season with a great lineup of FREE Sunday concerts in the park. Spanning 10 weeks across June, July and August, the collection of local musicians in this year’s lineup crosses cultures, styles and genres in a way that reflects the musical and cultural diversity of Denver." View concert calendar here.
Urban Market (July 7, 21, and 30)
"The Urban Market is a great place to shop in Denver. At the market you will find an amazing array of local arts and crafts sold direct by the artist, clothing, jewelry, antiques, furniture, holistic services, unique treasures, Delicious food, and just about anything else you could want. Come out and have fun in the sun while supporting your local artists, businesses, and community at Denver's premier outdoor shopping paradise." Learn more here.
Underground Music Showcase (July 28 - 31)
"The Underground Music Showcase (The UMS) is Denver, Colorado's premier indie festival, now in its 16th year. The UMS is known not only for its focus on local talent and the local community (its a non-profit event and benefits the Denver Post Community Foundation) but also for the diversity and crazy high energy of the performances you can see throughout its tenure. This year's incarnation showcases over 400 local and national act performances, across 4 days, in nearly 20 venues." Learn event details here.
Colorado Dragon Boat Festival (July 30 - 31)
"The Colorado Dragon Boat Festival in Sloan's Lake Park has become a wildly popular cultural bonanza in Denver over the past 16 years. Denver's 5280 Magazine declared it 'one of Colorado's greatest festivals'." Learn festival details here.
Denver homeowners love their pets and love the outdoors. Part of the reason we live in Colorado, is that we all love the mountains and being in them. We also love our dogs. As we live among the mountains, camping becomes our link to nature, our reason for enduring the commute and a respite from the world. Our dogs should also partake of the clean air that is only to be found at the foot of the Rockies. Rather than just load Fido up in your Subaru, let’s prepare, so that our camping trip with our best furry friend is enjoyable for all of us. With a few easy steps, we can have a great time in nature, and also share that experience with our dogs.
Emergency Kits for Humans and Dogs
Let’s face it, even the most accomplished camper can encounter injuries or accidents. This is true for pets, as well. Bring a first aid kit. This needs to include gauze, tweezers and hydrogen peroxide. You can find a first aid pet kit online or you can check out the many Denver pet department stores. Remember to have the phone number of your veterinarian, just in case. Learn first aid tips for pet owners here.
A Groomed Dog is a Happy Dog
It may be easy to forget, amidst the tents and sleeping bags, but a pet owner needs to remember the dog brush amid the charcoal briquettes and toilet paper. A dog’s fur can be easily matted or tangled in the tall grass or humidity you can encounter when you are camping. This is especially true if your best friend is long-haired. This is compounded by the stickers and other things that can be caught in her fur. If you brush your dog’s hair throughout your hiking/camping excursion, it will help her to keep her coif under control.
Last, but not least, pack collapsible food bowls for man’s best friend. Packing food and water is a no-brainer, but many campers forget about the bowls. You definitely want to choose a collapsible bowl, as camping relies heavily on economizing space, and can easily fit in a back pack. They are extremely easy to clean and are available in most pet stores, and even retailers. Keeping Fido hydrated will be crucial to a fulfilling camping excursion. Check out collapsible bowls and more at Denver’s upcoming Pet Expo.
Okay Champ, it’s Time to Head to the Mountains
Denver citizens are active, and we live at the foothills of the Rockies for a reason. As a homeowner in Denver, you deserve your weekends in the mountains. You also deserve to share them with your best friend. Planning ahead and taking some simple steps can make the difference between a wonderful experience for the whole family (fur babies included) and a disaster in the middle of the wilderness. Denver citizens are among the most intelligent and well-educated in the country. Surely, we can take a few precautionary steps to camp in the most beautiful mountains in the United Sates with our pets.
Bubble or No Bubble? The last seven years have seen a surge in the metro Denver real estate market as record numbers of buyers look for homes, which in turn has caused prices to jump. The strength in the market has been so pronounced that people are beginning to ask whether we’re setting ourselves up for another bubble. Good question. While no one can ever predict the future with certainty, I see no evidence that we’re heading for a dramatic downturn in the real estate market any time soon. Here’s why:
- Even with the continued increase in metro Denver home prices (up another 8 percent in the past 12 months) the average inflation adjusted PITI (Principle, Interest, Taxes, and Insurance) payment made in metro Denver is actually BELOW our 35-year average. This means that while prices have steadily risen, buyers are still able to afford their monthly payments, providing plenty of room for continued home price increases.
- The number of transactions relative to the population of metro Denver is just about at the 25-year average. At the peak of the bubble in 2006 the number of home sales was about 20 percent above the historical average. When we see the number of closed transactions well above our historical average that’s an indication of an overheated market, as it was in 2006. The number of closed home sales is actually DOWN 12 percent in the past year due to the low inventory. No sign of a bubble here.
- In 2006, many of the deals were closed with low or no documentation mortgages ("liar loans" or "no doc loans"). Today, mortgage underwriting standards are among the toughest they’ve been in decades. This prevents unqualified buyers from purchasing property, which mitigates the chance of the market overheating (fewer buyers means fewer purchases means less chance of the market frothing into bubble territory like it did in the past).
- Because of relatively high home affordability it’s a lot cheaper to buy than rent in our market. This would not be true in a bubble. For housing price affordability to return to the average level that we saw in the years between 2000 and 2004 either home prices would have to increase an additional 35 percent or interest rates rise to 6.6 percent. Neither is going to happen any time soon.
- The imbalance between buyers and sellers we’ve seen recently in our housing market (too many buyers/not enough homes for sale) is due to a lack of inventory, not illogical/unrealistic/unsustainable demand from buyers. "Much of the price increases we are seeing are the result of rising demand among investors and homebuyers for a still-limited supply of homes for sale," said Anand Nallathambi, president and CEO of CoreLogic. This imbalance is a logical correction from years past when we had too FEW buyers in the market. This is how markets are supposed to work, always regressing to the mean over time.
- Rising mortgage rates will help to temper the possibility of a bubble as well (they are still near 50-year lows but are expected to rise someday). "History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume," wrote Mark Palim in a Fannie Mae commentary. So the positive side of a rise in mortgage rates is that it will reduce the number of buyers and therefore lower the chance the market will rise out of control and end up collapsing in a bubble.
As you see from our monthly market snapshot, the inventory of metro Denver homes for sale continues to fall; it’s down another 5 percent from a year ago. Since the inventory is still extremely low (about 5,520 homes on the market where about 18,000 is a balanced market) I am all but certain the demand will still exceed the supply for the next several years and prices will continue to rise for the foreseeable future. No bubble on the horizon yet. Stay tuned!
Denver Chalk Art Festival (June 4 -5)
"The art you'll encounter during the festival isn't in galleries - it's on the pavement! The event features more than 150 professional and amateur artists who will spend hours on their hands and knees over the course of two days transforming Larimer Square into a bright and colorful street museum using vivid pastel chalks." Learn event details here.
Denver Botanic Gardens Concert Series (June - Sept)
"Situated in one of the nation's top botanic gardens, these concerts offer an unrivaled ambience, pairing a breathtaking setting with music from some of the world's most sought-after acts." Click here to learn more.
National Get Outdoors Day (June 11)
"Getting involved in Get Outdoors Day will mean you are part of a nationwide effort to reconnect American youth with outdoor activities and healthy lifestyles. Visit our interactive event where you can fish, bike, jump, garden, climb, paint, build, paddle, learn, dance, jump, eat, explore, and play! This event is accessible. We'll also host multiple stage activities and live music throughout the day alongside Denver Bronco Cheerleaders and PBS' Nature Cat." Visit event website here.
Taste of the Broncos (June 14)
"Taste of the Broncos is a casual, outdoor, tailgate style, fun-filled party at Sports Authority Field at Mile High! And, it's all for a great cause! Walking restaurant tour featuring some of Denver's most highly regarded chefs and their specialties, including Taste of the NFL's and Denver's own Troy Guard of TAG Restaurant Group. Live entertainment, including blue grass bands performing on the Noble Energy Sports Legends Mall with post event entertainment. Denver Broncos players, cheerleaders, alumni and Miles appearing as 'sous chefs'." Buy tickets here.
Do at the Zoo (June 16)
"Come celebrate all the amazing things Do At The Zoo has helped Denver Zoo accomplish over the past 26 years. Graze on sample dishes from over 60 of the city's finest restaurants and belly up to the watering hole for unlimited drinks featuring the region's best beer, wine and cocktails, all while enjoying our community's top live entertainment." Buy tickets here.
Denver Comic Con (June 17 - 19)
"Denver Comic Con is a three-day fan convention featuring celebrities and the best of popular television shows, movies, Japanese animation, cosplay, toys, gaming, sci-fi/fantasy, and of course, comic books." Learn more here.
Westword Music Showcase (June 25 )
"The Westword Music Showcase is the largest music festival celebrating the Denver scene. It runs from noon to 10 p.m. on June 25, and tickets are now on sale." Learn event details here.
Colorado Markets (Dates Vary)
"Colorado Fresh Markets presents a high quality group of Colorado growers and unique local gourmet food vendors representing the best of the Rocky Mountain region. Enjoy chef demonstrations, kitchen and garden products, gardening tips from Master Gardeners, live music and more in a fun and festive open-air shopping environment." Learn locations here.
The question I’m asked all the time by friends, colleagues and clients who are still renting is whether it’s too late to buy a home. "Are we heading for a big downturn?" and "Are we too deep in the market cycle to buy?" they wonder. For those of you who read my newsletter and know me well the following will sound familiar but it bears repeating: timing the real estate market perfectly is extremely difficult (maybe even impossible) and those who try usually fail. So don’t try to time the market. Instead, look at factors like the ones below to see if home ownership is right for you.
Consider Your Timing
You should buy a home when you feel it’s the right time in your life to do so. Don’t try to time the market, instead time your life. Are you getting married? Sick of paying skyrocketing rents? Looking for a bigger place for you and your family? Want your own backyard for the kids to play in? Want to be part of a neighborhood community? Plan on staying in one place for a number of years? Want to build long-term wealth? These are the types of questions you should ask yourself when considering whether you want to own a home. To the extent you say yes, home ownership might be the answer for you.
One important stat to keep in mind is that the average rental household in the U.S. has a total net worth of only $5,800. In contrast, the average homeowner has a net worth of $199,500 — that’s 34 times those who rent! There’s no doubt that over the long term, home ownership is the tried and true path to wealth accumulation and financial security. (So is owning rental property, by the way. Call me if you’d like to learn more about that as well.)
Consider Interest Rates
Interest rates remain at record lows but this can’t last forever. No one knows when they’re going to rise (remember, you can’t time the market!), but rise they will at some point in the future. Though home prices have gone up the past several years, low interest rates continue to make homes relatively affordable - especially compared to renting. Once interest rates do rise the window of home ownership affordability will truly begin to close for a lot of potential buyers. They will be sorry they didn’t act when interest rates were at 50-year lows.
To illustrate the numbers, assume you are purchasing a $210,000 condo with a 5 percent down payment. The Principle + Interest payment at 4 percent interest would be $952 per month. Just a 1 percent interest rate increase to 5 percent would result in a payment of $1,070 per month for a total increase of $128/month and $1,416/year. Now assume that rates tick up to 6 percent. That increase would result in a 21 percent increase in payments from $952 to $1,196. Where you really see the effect of these increases is when you hold the property for the full 30 years. On a $210,000, 30-year fixed-rate mortgage that increases from 4 to 5 percent, the borrower who obtains the 5 percent loan would pay an additional $42,772 in extra interest as opposed to the borrower who paid just 4 percent interest. That’s 21.4 percent of the total loan amount! This is why a lot of folks who don’t purchase a home while interest rates are near record lows are going to regret it down the road.
Consider Long Term Benefits
The main reason the average home owner has so much more personal wealth than the average condo owner is that, over time, homes appreciate in value. Over the past 45 years, homes in metro Denver appreciated 6.3 percent per year. If you buy a $200,000 home, you can expect over the long term its value to rise about 6 percent every year. This means you’d make $12,000 in appreciation the first year, an additional $12,720 the second year, another $13,483 in the third year, and on and on. An important fact to note is that in only 4 of the past 45 years did prices actually fall in metro Denver. So if you want to build wealth, your best bet may be to take advantage of these numbers and buy a home for the long term. I can help you do this. Call me and let me show you how.