The first daffodil leaves of the spring have popped up in my backyard and that signals one thing - home buying season is upon us!!! While home prices on the Front Range of Colorado have so far powered right through the Covid-19 pandemic, many are wondering if the good fortune can continue? Others are pondering whether buying a bigger home might make sense, or maybe even purchasing an investment property? With those questions in mind, I talked to a few of my favorite, trusted, local realtors to get some answers. Here is what I found out.
All of the realtors I spoke with predicted a strong market in 2021. Ken Crifasi, of Spaces Real Estate, says while he doesn't have a crystal ball, he sees another year of excellent, perhaps even double-digit, price appreciation across all communities on the Front Range. Just two and a half months into 2021, Crifasi shared he's seeing the strongest level of demand he's seen in ten years. And that demand is descending on the lowest levels of inventory we've ever seen. Anna Gayer, over at ReMax, said she's seeing most listed properties on the market right now being greeted with bidding wars from prospective purchasers. Buyers are having to drop inspections and have extra cash on hand to meet gaps in purchase price and appraised value. Crifasi believes particularly strong price appreciation may be expected in entry-level, single-family homes priced in the $400-700k range. Adam Kroll, of Space Real Estate, thinks the Covid-19 pandemic has produced multiple factors which have put upward pressure on that sector of the market, as well. Pointing to ratios like the number of Active Homes on the Market to New Listings, Kroll believes after the real estate markets virtually shut down last spring for a few months, the inventory of homes on the market never caught up. Kroll sees an influx of buyers who are looking for a larger home due to a growing family and/or a desire for a larger home office. But that's not all. He also sees buyers arriving from out of state who are now, thanks to the work anywhere lifestyle, untethered to geographic limitations. Couple that with local population demographics that are seeing peak numbers in the ages that are prime for 1st time home purchases and we have a strong cocktail, if not a perfect storm. All is not roses, however, Kroll notes on the downside mortgage rates have risen a bit the last few months and with mortgage forbearance ending, those who are unemployed may be forced to sell if they can't find a new job soon.
For investors, Kroll suggests looking at the condo and townhome market. In the last year attached-dwelling property owners have largely left to purchase larger single-family homes but the demand that has traditionally filled these vacated properties, which often comes from those working in the retail and restaurant industries, has disappeared. Kroll expects that as these service sector jobs return, buyers in this area of the market are likely to as well. Kroll thinks buying now, before that sector of the economy thaws, is a move savvy investors should at least consider. Meanwhile, Crifasi noted statistics which show net migration to the Front Range remaining positive, and suggested those new arrivals usually look to rent a living space before doing just about anything else.
The outlook for potential first-time homebuyers seems mixed. Crifasi notes prices on all homes seem to have already jumped about $50k in the first few months of 2021. Gayer agrees, saying if you have the ability to buy now, you probably should, as prices are clearly heading higher again. Still, if you're looking for a condo or a townhome, now may be the best opportunity you've had in awhile given the extra supply noted above. If you're looking for a single-family home, competition will be fierce and upward pricing pressure is likely to last throughout 2021.
Finally, in one new twist a few realtors are now recommending getting pre-approved for a loan through a company named Accept.inc. Currently operating only in Colorado, Accept.inc is a mortgage lender that affords you the opportunity to write an all-cash offer on the purchase of your home even if you don't have the cash yourself. Utilizing their own cash reserves, Accept.inc will pre-sign an agreement with a buyer to purchase a home for them with cash, at the price and terms the buyer sets, and then sell the home back to the buyer at the same price a few weeks later. The catch? You've got to use Accept.inc's mortgage lending services. If you've ever lost out to an all-cash offer this new business model probably speaks to you, and may radically change the balance of power in real estate markets.
All-in-all, the outlook appears quite strong. That said, I always advise clients to approach homebuying cautiously and with strong set parameters. If you're going to spend hundreds of thousands of dollars make sure to give that purchase a commensurate weight of consideration. Make contact with a realtor and mortgage lender long before you plan to buy. Visit A LOT of properties and make those realtors earn their commissions! (and I know I have some realtors reading this ;) On that note, understand how to choose a quality realtor; just because your brother-in-law got his license, it doesn't mean you have to use him. In strong markets like we are seeing, the structure of your offer, your realtor's negotiating skills, or even their availability to quickly get you into a property may make all the difference. And be sure to include your financial planner in the conversation as well - they like to know about these types of things. I mean, just look at what happened the last time someone didn't include me in a big purchasing decision!