Monica’s Monthly Minute- Denver Real Estate Market

Inside this issue:
Video: When is the best time to sell based on the price of your home?
Real Estate News: How long will this strong market last?
Buyers: Update on interest rates
Sellers: House to sell?
Investors: Buy and hold investments work in nice neighborhoods too
Mortgage: How to prep for your financing
February Video
When is the best time to sell based on the price of your home?
Real Estate News 
The questions I’m most often asked these days are variations on the following: “How long is this strong market going to last?” “Are we at the top of the market?” or “Is the market going to crash any time soon?”. This month I’m going to give you my thoughts on where I think we are in the market. The short answer is we haven’t reached the top and I expect the strong seller’s market to last for a good, long while, probably several more years. Here’s why:
  1. Inventory of homes for sale. The metro Denver market has about 3.1 million residents. A community of this size will have a balanced market when it has an inventory of 16,000 – 18,000 properties on the market for sale. Today we have about 3,900 properties on the market which is why it’s such a strong seller’s market. There simply are more buyers than sellers out there leading to multiple offers and price increases. And it’s not just recently our inventory has gotten so low, it’s been falling steadily since 2007 when we peaked at over 31,000 properties on the market. In my opinion, the inventory of homes for sale is the single best indicator of how strong the market is. With such a low inventory, our seller’s market will continue for the foreseeable future.
  2. Interest rates. Interest rates rocketed upwards in the spring of 2013 and every real estate expert imaginable declared the era of low interest rates over. Well, they all got it wrong. Today, interest rates remain near 50-year low with the par interest rate hovering just above 4%, continuing to make homes affordable. Many of the buyers who are taking advantage of these low rates have rented for the past several years and are finding it more affordable to purchase a home than continue to deal with rent increases. To see if you should consider buying a home check out this really cool calculator Trulia put together at http://www.trulia.com/rent_vs_buy and see what your best choice might be.
  3. We still have lots of room for the market to grow and sell more homes. Your Castle Real Estate did an analysis looking at the housing market for the past 40 years in order to see how we are faring today. See graph below. The dotted line is the population and the solid line are the numbers of homes sold to that population of metro Denver. As you would expect, during downturns fewer people buy homes and during upturns more people buy homes. Looking at the chart you see that we have had a fast-rising number of sales the past few years but we do not appear to be anywhere near oversold given our increased population, like we were in 2004 for example.
Looking at the full picture with the data available, my prediction is that this strong market is not heading for a downturn any time soon. As long as the inventory remains low we will continue to see a strong seller’s market and a continuing rise in prices in the 6% – 8% range. I don’t see any indication that the inventory will rise any time soon.
Please give me a call if you want to discuss what matters most – what YOU’RE looking to do in the market. I’d be glad to help!
Buyers
The great news for buyers is that interest rates have remained wonderfully low, defying all
 predictions from the so-called experts. Lower interest rates mean more house for your money, plain and simple. For the average homeowner a decrease of .25% in interest rate can equate to a gain of as much as $10,000 in buying power.  For example if you qualified for a $200,000 loan at a rate of 4.25% and then your rate decreases to 4.0% you may now qualify for a $210,000 loan.
Sellers
You’ve heard me say this for months (years!) but it bears repeating, the housing market is on still fire and we need homes to sell! There just aren’t enough to meet the buyer demand.
What does it look like for a seller these days?
  1. Metro Denver average home prices are up 11.4% in the past year.
  2. The inventory of homes on the market in metro Denver is near the lowest on record at 3,946 and shows no sign of increasing any time soon.
  3. The average Days on Market for a home is down 2.9% in the past year, at 34 days. A normal market would show 90 Days on Market.
  4. Most deals I work on have multiple offers, whether I’m the buyer’s agent or the seller’s agent.
Add it all up and you get an amazing seller’s market. Sellers are reacting by hiking prices and testing the limits of the market. And you can too! Call me if you want to discuss what your home is worth in this seller’s market and how best to take advantage of it! If you need to buy a replacement home, we can also discuss your options so you aren’t left in between without a home. We have been successful at selling a home and helping to close on the replacement home simultaneously.
Investors
A lot of investors think that investing in rental properties only works in low-end neighborhoods
 with beat-up houses and scary tenants. Nothing could be further from the truth! Your Castle has done a great deal of research lately and found that buying and holding properties in quality locations like The Spire can yield tremendous returns down the road. Using very realistic numbers, a two bedroom condo in The Spire has a CAP Rate of about 6%. An investor in a combined marginal tax bracket of 40% can yield an average annual return of 15%. Try making that in your savings account! As long as interest rates stay low (which cannot last forever), high quality buildings will generate enough rent to cover most or all of their direct costs.
Mortgages
The mortgage market is staying hot with interest rates near historic lows.  If you haven’t reviewed your options lately it may be a great time to take a look at trading up to a bigger home with a manageable payment. But before applying for your new mortgage make sure that you are in good shape with the four items needed for a new loan:
1. Income – Make sure your income is remaining consistent and your tax returns are reflecting your total annual income.
2. Credit – For the very best rates you want to have a credit score of 740 or greater.  There are loan options for clients all the way down to a 580 score, but as your credit score goes down your rate goes up.  So, it is to your benefit to have your credit cleared up and as high of a score as possible.
3. Assets – You will need to have funds in the bank for your down payment and to show you have two months of savings.  Make sure you are depositing all earnings and keeping good records of your bank statements.
4. Collateral – The property you are borrowing against (your current home or your new property) needs to be in good shape and not have any “safety or soundness” issues.  Make sure there are no broken windows, plumbing leaks, etc. I can help you assess your home to determine the most important items to repair/replace.
By taking care of these four critical areas you can be confident that you will qualify for a new loan and be able to refinance or buy a new home.
From our clients:
We’ve had experience with several Real Estate Brokers in the past, but never had the excellent response we received from Monica Perez. She kept us informed on everything she was doing to make the sell of our house go smoothly. Can not say enough about our experience except that she is very customer oriented and works for you.
       Rick, Englewood 
Thank you! It is my pleasure helping you achieve your goals! 
Monica Perez, Broker | Your Castle Real Estate | 303-912-3320 | mperez@monicaperezre.com | www.MonicaPerezRealEstate.com
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