Denver, and Colorado in general, has long been a desirable place to live. From our sunny days and access to the beautiful Rocky Mountains to top-notch education and work opportunities, it’s no wonder so many want to call the Mile High City home. Unfortunately, in the last few years, the ability to own a single-family home has become extremely difficult for many. We asked our award-winning mortgage team about the 2021 homebuying market in Denver and their tips for house hunters.
What are the factors impacting the Denver housing market?
- Low inventory – At the time of writing this blog post, there are fewer than 20 single-family homes under $400,000 for sale in Denver. This shortage of single-family homes in Denver (especially for first-time buyers) is created by several factors, including the coronavirus pandemic and low inventory itself. Due to the pandemic, fewer people are willing to list their homes and have open houses with strangers in their homes. Because there is such low inventory, many owners do not want to list because of how hard it would be to find another home if they plan to stay in the Denver area.
- Cash buyers – Many buyers are coming to Colorado, escaping more densely populated states like New York and California. These buyers, who sold in expensive markets, are more likely to offer cash for a purchase instead of financing their purchase. While this has been common in the past, it increased further in 2020 as more people were able to work remotely due to the pandemic.
- Appraisal gaps – This is the difference between the agreed-upon price and the appraised value of a home. For example, a house is listed for $100,000, and 14 offers come in. One offer comes in for $110,000, and that offer is accepted. If the appraisal of the property only values it at $100,000, the buyer would have to pay that $10,000 appraisal gap, in addition to the down payment at closing. Currently, in the Denver market, nearly 90% of contracts have appraisal gaps.
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Is there inventory anywhere in Colorado?
For the most part, this pattern of low inventory and a seller’s market is statewide. It seems to be most prevalent in Denver, Boulder, Colorado Springs and Fort Collins. While it’s hard to find and buy single-family homes across the state, there is some good inventory on condominiums. If a buyer has more flexibility with their timeline, they may also want to consider a new build. As summer nears, the inventory on single-family homes across the Front Range might improve.
What tips do our mortgage officers have for homebuyers?
The key to making a good home purchase is having a team support you and educate you during the process. A real estate agent and mortgage lender you trust will give you peace of mind during a challenging process. The first step you should take as a buyer is to know where you are financially before looking at homes. Your mortgage lender can help you understand what you qualify for before you reach out to a real estate agent. They can outline all the options available to you, from traditional mortgages to FHA loans and VA loans, or something else. Your mortgage loan officer can also refer you to a knowledgeable and responsive agent to make the process smooth for you.
Don’t be afraid to ask your mortgage loan officer and real estate agent questions. Making a home purchase can be a confusing process, so there is never a silly question. When you’re looking for a lender, look for more than just a rate. Research lenders and loan officers to make sure you can trust them with one of your most significant investments.
Build your Colorado homebuying plan.
You can set up a no-obligation meeting over the phone, in person or virtually with one of our experienced Elevations Mortgage Loan Officers to learn about your options and make a plan that fits your financial goals.