NOCO Real Estate Market Report / February 2022
We have reached all-time lows in inventory despite significant mortgage rate increases. Rates are now bouncing around 3.6-3.9%. It’s important for buyers to note there is the same number of homes coming on the market each month as there were 10 years ago. They are just getting purchased more quickly by a pool of buyers that is larger than we have ever seen in history. This large buyer pool is simply a function of demographics: there are more people in the prime home-buying age bracket (late 20s to early 40s) than there has ever been. Interest rates add fuel to the fire. But demographics are the foundation of the persistent supply shortage.
Our buyers are having the best success when they position themselves to shop for homes over a period of months, instead of expecting to find a home in a few weeks. It’s discouraging to look at the market on any given day and find that most homes are under contract. But if you watch the market over a period of a few months, you will find great homes to buy. You simply need to move quickly and understand how to structure your offer to be competitive.
I think rates will struggle to get above 4% this year, and I think we will see appreciation rates of around 10% in Northern Colorado. That means that our median price could jump from $560,000 to well over $600,000 by this time next year. In December, Zillow projected the national median price would jump 11% in 2022. But just yesterday they revised that estimate to 16%! That’s quite a prediction given the current rising interest rate environment. If rates are able to get into the mid to high 4% range and stay there for 6 months, expect slower rates of appreciation but do not expect big price corrections. Those waiting out the market expecting a 2008 price collapse are comparing apples to oranges. They will pay dearly in lost appreciation and mortgage buy down and may delay their dream of homeownership much longer than they realize.
Right now our low down payment buyers are really struggling. Sellers are expecting buyers to waive appraisal contingencies in almost every case. When buyers do not have the cash to buy a home at a price above appraised value, they’ll have a very hard time getting a home under contract. In many cases, they must either buy new construction, borrow money from a family member, or find a home off-market. Buyers with higher down payments must prepare to be aggressive but are having a much easier time getting homes under contract.
Home sellers must decide how to price their home given their situation. We are often testing the market with asking prices significantly higher than comparable sales suggest and are often getting those prices. But when you shoot for the moon with your list price, you may see a reduction in the number of offers you receive and less favorable terms on those offers. Even so, the moon shot pricing strategies often end up fetching more money than the bargain price approach.
We continue to see excellent results staging our vacant homes with designer furniture and helping our clients perform light updates to get top dollar. Of course, homes will sell quickly without these efforts, but for tens of thousands less than they could have.
Planning is the key to success in this market. Please don’t wait until summer to reach out to us to discuss your move.
Thank you for reading and for your continued trust in us!