I have had multiple conversations over the past several months with people who own a home, and would consider moving, but have decided to sit put and use some of the amazing amount of home equity they have gained in the last few years to improve their home. Perhaps knocking down some walls, updating the bathrooms, or finishing a basement will give them the desired flow and space they are looking for. Or perhaps not. I am telling them, “Go for it!”.
Remodeling instead of moving is a huge movement in our area right now. As long as home owners are making wise choices on finishes and where they put their money in those remodels (don’t over-improve for the neighborhood!), they will be able to make those changes and then decide if they still need a new home after all. If they decide it is time to move, their home improvements will likely bring a higher sales price.
These home owners who are not quite ready to move up or downsize in our current market are not the people I am most concerned about. Their homes will continue to go up in value and they will proceed to grow even greater home equity to pull from when purchasing their next home. However, because so many people are of the same mindset, we are seeing record low numbers of inventory. The home buyers I am more concerned for are the first time home buyers and buyers waiting to move into the Colorado market until the market cools.
I have heard from buyers since 2014 stating that the house they are interested in is “not worth what they are asking” only to see it sell for $20,000 more than list price…over and over and over. They claim they are waiting for the “bubble to pop” even though experts point out that there is no bubble and our market is a result of a desirable location and low housing supply. People insisted that when other states legalized marijuana, people would flee Colorado and housing prices would decrease. However, marijuana is not the driving factor in our population growth. A strong economy, tech industry, and desirable location for outdoor enthusiasts are also large factors in play.
Buyers that realized it was better to compete in our strong Seller’s market, with strategies that have proven to win the multiple offer bidding situation, have enjoyed instant increases in home equity. Many of them have already refinanced, since rates are still relatively low, and rid themselves of PMI payments. They also have been able to pull from equity it to make those cosmetic improvements to the “not quite perfect” home they purchases.
It appears that 2018 is going to be another hot year in Denver real estate. If you have been waiting to make your home purchase, you have hopefully been continuing to save aggressively to keep up with the increasing prices. As mortgage rates continue to rise, along with home prices, it is going to be even more challenging to make that purchase.
In January of 2014, the Median Sales Price for a Single Family Home in Broomfield County hovered around $300,000. As of January 2018, that figure was $464,000. If you were wanting to make a 20% down payment, based on these numbers, you would have needed to save an additional $32,800 in the last four years and anticipate a significant increase in your monthly payment for the same home…around $700 a month in this case! You also lose out on that gain of $164,000 in wealth to use to make home improvements, get rid of PMI, pay off student loans, etc.
This is why we say a strong Seller’s Market is actually a Buyer’s Market as well. When you buy in a market that is rising, you are instantly building equity as the home values increase. What happens if you wait for a balanced market or until the market does finally start going down? You will not only be paying more for the same home than you would today, but you will also not know when the market will start going up again until it hits rock bottom. This means you have bought a home that is steadily losing value, rather than one that is rapidly gaining value. It simply makes more sense to buy your home when it makes sense for you and your family, rather than trying to time the market.
Please reach out to me you are nervous about competing in multiple offer situations, navigating the timing of both selling and buying a home in this market, or any other concerns. I have many tactics and solutions that have helped people win in this wild market!