2021 Colorado real estate predictions
Denver real estate has held surprisingly strong during this otherwise difficult period
No doubt about it: 2020 is one for the history books. While January started off strong, COVID-19 created uncertainties not experienced in this lifetime. Throw in a tumultuous election cycle and periods of civil unrest and you have a potent recipe for market instability.
While many industries have been hit hard, Denver real estate has held surprisingly strong during this otherwise difficult period.
Wondering what 2021 has in store for Denver real estate, and if 2021 is the year to buy and/or sell? Here are some insights and predictions that may inform a few of those big decisions.
Inventory will remain low
2020 saw Denver’s available housing inventory reach record lows. According to an article published in the Denver Post, the number of residential properties available for sale in metro Denver dropped to 3,415 at the end of November, the lowest ever recorded for a November.
With interest rates currently hovering in the 2 – 3% range, many are racing to capitalize on the ability to lock-in a long-term mortgage at a record low rate. This is increasing demand for inventory, with first-time millennial home buyers seeing an opportunity to enter the market, and current homeowners capitalizing on the strong rental market and snapping up investment properties.
What this means for buyers: Work with an agent who will be as aggressive as the market. Search for homes early and often and be prepared (and prequalified*) to put an offer on a house immediately after touring.
What this means for sellers: You’re likely to sell quickly and fetch a good price for your home, but be aware of commissions and fees. A traditional real estate transaction will cost you 5 – 6% of your sale price in commissions. With an average Denver home price of $561,000, you’re paying up to $33,660 in commissions to sell a home that may go under contract in just days. Do your homework and consider other options. Companies such as Homie charge a flat $3,000 fee to market and sell your home, saving you an estimated $13,830 in commissions on a $561,000 home.
Prices will continue to increase
October 2020 saw a 16% sales price increase in Denver compared to the year before. It’s unlikely that the record-low, inventory-led appreciation in home prices will slow down. Given the rate of growth in housing prices, it is likely that 2021 will see the average home price settle closer to $600,000, on average, over the course of the year.
What this means for buyers: Work with agents and companies who are open to negotiating their commissions. If you’re buying at the top of the market, lower commissions or buyer rebates will help soften the blow of the price you are paying.
What this means for sellers: Consider diving into some of those key home improvement projects that will help you increase the value of your home. Continue to review market fluctuations and be ready to sell before supply and demand even out.
Interest rates will increase slightly in mid-to-late 2021
Much of the current demand in the Denver real estate market is due to record low interest rates set in an attempt to combat negative economic growth driven by the COVID pandemic. The US Federal Reserve has hinted it does not plan to increase these any time soon, but rates cannot remain low for too long.
Many mortgage experts predict interest rates will remain low for at least the first, possibly the second quarter of 2021 with small increases during that time likely. Many experts agree that we will likely see interest rates reach 3%-3.5% during the course of 2021, however much of this will be determined by the economic recovery in the aftermath of the pandemic, which is difficult to predict.
What this means for buyers: Buyers should keep an eye on interest rate activity and get prequalified as soon as they are ready to start making offers. Locking in a long-term loan at these rates could save you tens (or even hundreds) of thousands of dollars.
What this means for sellers: Selling earlier rather than later when the market has ‘leveled out’ could mean you secure a better price for your home and more equity in your pocket.
Seasonality in home buying and selling will shift in 2021
In previous years, we’ve seen predictable, seasonal trends in terms of real estate market activity with spring generally being an ideal time to list your home for sale. However, with so much change and uncertainty – both in the market and surrounding the outcome of the COVID pandemic and vaccine – we expect to see real estate activity in Denver-metro increase throughout the early 2021 winter months. Buyers will likely capitalize on the currently low interest rates (and fear they may increase once a vaccine is finally distributed).
What this means for buyers: Buyers should continue to monitor available real estate inventory closely. Consider registering your information and search criteria with a reputable brokerage to receive regular and timely updates. Companies such as Homie have a user-friendly app and website that showcases all homes for sale in the Denver metro area—not just those listed by them.
What this means for sellers: Don’t necessarily wait until the spring to list. Start vetting agents now and prepare your home and finances for a sale earlier than spring.
2020 has been a surprising success story for Denver real estate and experts are optimistic the market will hold strong well into 2021. Prospective 2021 buyers and sellers should start planning now and continue to monitor the market as we head into the new year.
Most importantly, arm yourself with a strong agent who is willing to go the extra mile and make sure you have complete transparency around fees and commissions—you don’t want any surprises at the closing table.
Melissa Millan is the General Manager of Homie Colorado, a real estate company changing the way real estate is bought and sold by eliminating high fees and commissions. To learn more, visit www.homie.com/Colorado.