It has certainly been a wild ride for all of us these past months and the Denver real estate market has been no exception.
The year got off to a fast start with property values poised to jump yet again. Then the pandemic hit. March tracked along fairly normal but in April, everything went off the rails and into a coma of sorts as real estate virtually shut down under the stay-at-home order. During April and May, the number of closed sales dropped 40% from the same period a year ago. Understandably, the most frequently asked questions became what would happen to the market when things opened up again? Would home values drop, creating opportunities for hopeful buyers in Denver’s ever-tight housing market?
By mid-May, the market officially opened again and the questions — at least for the short-term — received a fairly rapid answer. Sellers brave or desperate enough to venture into the unknown were greeted in most cases with strong, pent-up buyer demand. Homes in traditionally hot neighborhoods had buyers literally lining up to view homes, and multiple offers were the norm. One Washington Park listing had 80 showings in two days and more than a dozen offers, which was remarkable even for that perennially strong location. Although the market lost about six weeks, it was apparent that things had gotten back to some version of normal rather quickly. Property values during that period remained very stable compared to 2019 values while there was clearly pressure on the market to press values even higher.
What do we make of this and where is the market headed for the rest of the year? First let’s consider underlying factors. During the height of the pandemic, most financial markets were in freefall but such, often has an unlikely silver-lining — interest rates also tend to fall in such times. For the past 10 years, interest rates have bumped along at historic lows but the pandemic pushed those even lower. The most traditional home loan, the 30-year fix mortgage, was suddenly available to most buyers at close to 3%. In home buying parlance, that is practically free money. Home buyers understandably jumped at the chance to secure such attractive terms. Secondly, although the high unemployment has made headlines, the vast majority of the Denver workforce retained their jobs and didn’t drop out of the potential buyer pool — all of which created something of a perfect storm of demand.
Significant questions about the market still remain. What will be the longer-term effects on the Denver market? Sellers to some degree have not greeted the market with as much enthusiasm as buyers. Some would-be sellers have chosen to remain on the sidelines, fearful of the unknown and of course becoming stranded buyers themselves unable to find replacement homes. Sellers deciding not to sell further constricts the housing market and exacerbates the housing shortage. It is difficult to know when sellers will feel it is safe to venture out again.
So much hinges on the broader economic recovery, and for the moment it seems no one has a clear handle on where that is going to go and how long it is going to take. The National Bureau of Economic Research announced mid-June that we have officially been in a recession since February. It is anybody’s guess how long that will last at this point.
One encouraging bit of history we can look to in all this is perhaps the last recession of 2008-2011. If that recession is any predictor of the present Denver housing market, then likely we will weather the storms quite well. During that period, which was a housing-driven recession with home values plummeting in most parts of the country, Denver actually did quite well. Our housing market slowed but home values didn’t drop significantly and recovered quickly. Likely a hopeful indicator of where things will trend around here.
The coming months will certainly not be dull, stay tuned.
Tom Snyder is the owner and managing broker of Snyder Realty.
