There are many changes taking place in the real estate industry as of late. The Federal Reserve has increased its interest rates, which is leading many people to believe that banks and other lenders will soon follow suit. In February, home prices in Denver increased by 9.7%, following along with the cross-country trend.
Year-Over-Year Price Increase Comparison
According to the Standard & Poor’s/Case-Schiller home price index, the increase in year over year home prices in Denver ranked third in the country in February. The country’s two highest increases were in Portland, Oregon at 11.9% and Seattle, Washington at 11%. Experts believe that these price increases are being fueled by impressive job gains thanks to new technology companies making themselves at home in these cities. Because of this, the demand for homes is climbing, and prices are also climbing to follow suit.
Number of Homes on the Market
At the national level, prices are still rising although sales have managed to level themselves out in recent months. Last month, the number of homes available on the market nationwide was 1.5% lower than in March 2015, which means that buyers are acting more quickly. In fact, according to the National Association of Realtors, homes spent only 47 days on the market in March, an indicator of just how quickly they are selling. This means that it is indeed a seller’s market – at least temporarily – despite the uncertainty of mortgage rates around the country.
What Does This Mean for the Luxury Home Market?
Luxury home prices in Denver are not rising at quite the same rate. In fact, according to Svenja Gudell, who is the chief economist at Zillow, buyers who are interested in luxury homes “will find somewhat softening prices, a larger selection of homes to choose from and more limited competition”. This means that the luxury home market is not expected to change much, even when home prices across the country are rising rather rapidly.
Entry-Level and Mid-Market Homes
Gudell claims that the biggest changes are occurring in the entry-level and mid-level home markets, where the competition is fierce, prices are climbing rapidly, and the inventory is becoming more limited by the day. In fact, she went so far as to say that many buyers would have their patience tested in coming months. Although this may be a bit unnerving, it also goes to show that investing in Denver area real estate may be a good idea at this point. With prices rising rapidly and such high demand, home appreciation is expected to occur much quicker than normal.
A Perpetual Problem?
Some experts believe that the lack of homes on the market may turn out to be a perpetual problem. There are many reasons for this, but if homeowners do not see many available properties from which they can choose, they are less likely to list their own homes on the market – even if they have every intention to sell. What’s more, many homeowners simply do not have enough equity to afford a down payment on a new purchase, which is even truer these days with rising home prices in Denver.
Although home prices in Denver are climbing rapidly, this has had little to no effect on the luxury home market as of yet. Whether the prices and availability of luxury homes will be impacted by this trend remains to be seen.