Colorado’s red-hot real estate market may cool as it runs into the frigid winds of limited housing availability and skyrocketing prices.
Only 1,921 homes and condos were for sale at the end of March in a metro area with more than 3.2 million people, according to the Denver Metro Association of Realtors. The average closing price hit a record high of $674,990 in March, a 19.3% gain from March of last year.
“Despite the brief slow down during initial lockdown orders, the real estate market shows no signs of slowing,” says John Skrabec, president of Live Urban Real Estate.
“The only thing standing in the way is a lack of inventory, which is causing frustration with both buyers and their agents. The pandemic has only exacerbated the shortage of homes to purchase.”
What’s causing the shortage?
Denver’s housing crunch isn’t new, but the pandemic boosted demand as more buyers wanted to move from apartments into houses or upgrade from their existing homes to bigger ones.
“Home has become more important than ever before,” says Ryan Carter, president of 8z Real Estate. “It’s not only a place of comfort and stability but also frequently a classroom, gym and office.”
Also, high lumber prices drive up costs for builders and slow new home construction, says Stacie Staub, founder and CEO of West + Main Homes.
Despite the challenges, real estate agents are committed to helping their customers.
During the past year, 8z Real Estate created programs to help both employees and customers.
“We recognized that many who are part of the greater 8z community were struggling and directly affected by the pandemic — losing jobs, income, or navigating illness,” Carter says. “As a result, we launched the $100,000 8z4Life support fund, which provides housing-related grant relief, including mortgage forbearance, deferment and forgiveness support. We have since paid out 37 grants and almost $75,000 in mortgage assistance.”
Real estate companies also quickly changed how they showed homes to protect both buyers and sellers during the pandemic. Some of those changes included virtual staging, interactive 3D tours, limiting in-person home showings, and requiring agents and potential buyers to wear masks and gloves during home tours. Buyers also have the option for remote closings.
“The last year has seen tremendous change within the real estate industry, creating a modern market as we have never seen before,” Carter says.
The agency offers its 8z Cash Buyer program to help potential buyers with an all-cash offer, which can be more attractive to sellers. The agency also offers its 8z Bridge program, which allows buyers to move into their new home before listing and selling their current one.
With high demand from buyers, many homes sell sight unseen for thousands over their list price. For houses that stay on the market, even briefly, scheduling a viewing appointment can be challenging.
To make sure more buyers have the chance to see homes for sale, West + Main has changed how it sets up open houses.
“We hold listings open all day on Saturday, and it’s first-come, first-serve, ” Staub says. “By asking people to wait in line for a few minutes, we can make sure everyone who wants to see a home can do so.”
The agency keeps one agent outside and one inside to limit access and sanitize between showings.
Carter anticipates virtual showings will continue to be popular. “Many clients prefer that option,” he says.
Fixing the problem
Increasing the number of homes on the market isn’t likely to change any time soon, real estate experts say.
“Unfortunately, I don’t see that changing in 2021,” Skrabec says. “It’s difficult to imagine a scenario where more housing inventory will become available soon. We’ll have the normal seasonal uptick in activity during the spring and summer, but as interest rates inch up, it could force some homebuyers to sit on the sidelines. All-in-all, the current market dynamics will remain.”
The market may ease as some homeowners stop struggling to make their mortgage payments or end taking advantage of forbearance, Staub says. That shadow inventory of distressed properties may soon start showing up for sale and help ease the housing crunch.
But the best solution to meeting demand may be building more houses, Skrabec says.
“We are working with our brokers to explore and become experts in new construction, which is a great alternative for buyers who have flexible timelines.”
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