How COVID-19 has impacted the housing market in Colorado
The novel coronavirus (COVID-19) continues to negatively impact the economy, and the housing market is not immune
The novel coronavirus (COVID-19) continues to negatively impact the economy, and the housing market is not immune.
Nationally, the housing market continues to shrink as the National Association of Realtors recently reported. Existing home sales fell again in May, marking a three-month decline in sales as a result of COVID-19.
Overall, home sales fell year-over-year and are down 26% from May 2019.
In July, there seems to be a market rebound as consumer confidence begins to rise and as mortgage rates hover around historic lows.
Those mortgage rates continue to boost homebuying demand and refinancing activity has picked up as a result. Mortgage applications to purchase a home were up 33% year-over-year in the first week of July, according to the Mortgage Bankers Association’s seasonally adjusted index. This continues to push homebuyers into the market, and this is especially true in Colorado.
What’s happening in the Colorado housing market?
In terms of the housing market, Colorado has been an anomaly compared to the rest of the country. Our residential real estate market has remained strong despite the pandemic.
In fact, Denver has a housing shortage, which continues to make it a hot market and boost current homeowners’ optimism for selling as there is a lack of supply in the area.
While this supply dipped in April, the July report from the Denver Metro Association of Realtors shows a surge in new listings, up 17% year-over-year. And while home prices were holding steady through June, they are now on the rise as Denver is turning into a strong seller’s market.
In Denver, people were searching for homes again in June as the economy opened back up and as record-low mortgage rates remained intact.
Real estate agents closed nearly 60% more home sales in June compared to May, and housing prices are still up compared to 2019.
However, the issue of low inventory in the housing market is not new to Colorado and it is what has kept the market hot despite a global pandemic.
A summer housing boom
Colorado has always been a strong market for vacation homes and that demand is growing, as the pandemic has caused more people look to experience the outdoors.
Further, the pandemic essentially pushed the ‘spring market’ back, and we are starting to see a rebound in the summer months. While realtors are not hosting open houses, many have turned to one-on-one home tours and virtual showings.
According to the Colorado Realtors Association (CAR), virtual tours have increased demand and shaped a new reality for real estate transactions as more people are buying homes without physically seeing them first.
What our experts are seeing
Even before the COVID-19 pandemic, banks were working with buyers to get them pre-approved and ready to go in this hot market. This has not slowed down much for our buyers during the last several months.
At UMB Bank, our Colorado clients’ average mortgage loan is around $1 million, which requires a jumbo mortgage. A mortgage is considered jumbo if the dollar amount falls above a certain limit, usually above half a million dollars.
COVID-19 did not have a big impact as inventory has continued to outpace demand, and we believe the rate cut for Denver will keep the purchase market hot and put more consumer dollars into it. There are lots of people looking to take advantage of the low rate environment for either their first home or second home.
It’s important to remember that it could take anywhere from six months to a year for the market to fully show the impact of the pandemic. But for now, the Colorado housing market remains in a good position. First time buyers should prepare to fight multiple offers, and many people are still on the hunt for a new house, as the need for home offices or simply more space has become apparent for those who are spending more time at home.
COVID-19 has impacted the economy and daily life in a number of ways, but the Colorado housing market has remained strong in spite of it.
If you’re looking to buy a home, be sure to work with a financial partner who understands the nuances of this unique market and will get you thoroughly prepared to navigate the sometimes tricky terrain.
Brad Swanson is a senior vice president and private banker at UMB Bank in Denver and can be reached at Brad.Swanson@umb.com. Narine Avanesova is a vice president and private banker at UMB Bank in Denver and can be reached at Narine.Avanesova@umb.com.