When is the Best Time to Buy?
THE GIST
You can’t necessarily time the market, but you can certainly understand the data behind it. The number one priority we have with our clients is education. Here’s a bit of how we inform them.
THE METRO DENVER MARKET CYCLE
Over roughly the last decade, the Metro Denver real estate market generally displayed the same pattern of activity every year: a hot Spring market with relatively low inventory [often leading to bidding wars]; a slight receding of the buyer pool come June with a bit more inventory hitting the market [just as buyers turned their focus to Summer fun]; then the most inventory of the year coming to market after July 4th through the end of September, with buyers pulling back during this period due to the start of the school year; and finally a stabilization of the market October through December. This market was characterized as having 3 months of inventory or less and/or a typical 8-12% annual appreciation rate. The majority of this appreciation occurred March-June, and a small month-over-month closing price decline was common until October when prices leveled out until the end of the year.
COVID-19 IN METRO DENVER REAL ESTATE
Then COVID hit. This changed our cycle and we are still trying to find our new normal. This year, in 2022, the market was off to the races just about as soon as January 1st festivities were in the rearview! With low interest rates [an average of 3.22%], and super low inventory [under 3,000 homes on the market], high buyer competition started very early [with $100,000 above-ask offers not uncommon on many homes] and lasted through about mid-May. The increase in interest rates, however [intended to slow the market and combat economic inflation], brought Metro Denver real estate all but to a complete halt — with showings per property [in the first week on the market] dropping from an average of 26 in February to two this July. Yes, you read that correctly.
OUR CURRENT MARKET
We currently have double the inventory from June to July, at approximately 7,000 listings on the market, but still just 1.2 months of inventory. This means if no new listings were to come to market as of tomorrow, we would run out of homes to sell buyers in 1.2 months. The relatively high interest rates are keeping many buyers out of the market, though, leading to a more even playing field between buyers and sellers, typically with all of the negotiating points on the table [instead of inspection and appraisal objections waived by buyers in their offer just to go under contract on a house].
OPPORTUNITY FOR BUYERS
What a lot of would-be buyers don’t realize is that most lenders are offering advantageous programs to make their loans more affordable right now. So because inventory is high and demand is low relative to what we experienced in prior months, buyers have more choices AND more negotiating power now through likely the end of September. This means no more full appraisal gap coverage requirements to win the contract, no waiving of inspection objection or other deadlines, and more time to decide on a home at list price or even lower, more often than not. Furthermore, we usually see a 40%-60% drop in inventory as we head into the new year. So if interest rates stay pretty stable and demand continues as it is, we will be back to bidding wars in January/February 2023.
WHAT’S AHEAD
Perhaps the market will follow our more traditional cycle [if interest rates don’t escalate too high] and stabilize from October through December, which typically sees the lowest closing prices of the year. But this also means less inventory to choose from.
REAL ESTATE FOR THE WIN
There are pros and cons to buying at any time in the market, and to be completely frank — the best time to buy was yesterday. Getting into the real estate market in Metro Denver has shown incredible reward in the past decade. And longterm, real estate values increase. Yes, there are dips and downturns, but if you’re in it for the long run, you will inevitably see value gain over time. Last year, we had around 20% average appreciation in Metro Denver real estate. This year is truly anyone’s guess, but the experts say we should round out 2022 with at least 8-12%. The Metro Denver market will then likely continue to appreciate on the whole, but at a slower rate. Maybe 5-6% next year, depending on rates and world events.
WE’RE HERE FOR YOU
The Aster Lane Group is always here to provide further data and insights on where we’ve been and where we’re headed in Metro Denver real estate. Thank you for taking the time to read this post. We look forward to providing more valuable content here on our blog for you, so stay tuned!!
*Data applies to the 7 Metro Denver Counties of: Adams, Arapahoe, Broomfield, Denver, Douglas, Elbert and Jefferson. Thank you to Megan Aller at First American Title Company for the assimilation of data.