Denver Homes Are More Affordable Now Than Ever

Today I wanted to update you on the market for the second quarter of 2016 and discuss some of the changes to interest rates and how they affect affordability as well. 

While mortgage rates for this quarter are up a bit, they’re still really low by historical standards. Households with a $60,000 yearly income can currently afford a house with a purchase price of $310,000 at today’s interest rate of 3.5%. If rates were to jump up to 4.5%, this same household would only be able to afford a $275,000 home. This 1% increase in rates can dramatically affect the kind of home you’re going to be able to afford.

Looking at the graph at the bottom of the chart, we can see pretty clearly that 30-year fixed interest rates between 1970 and 2014 were significantly higher than they are today. To put this into perspective for you, in 1970, a household bringing in $60,000 per year looking to buy a home with a purchase price of $170,000 at the average 9% interest rate of the time would have to make a monthly payment of $1,610. Today, a family with the same income per year would be able to afford a $290,000 house for $965 per month at the current average interest rate of 4.1%.

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It’s a strong seller’s market for homes 1,850 square feet or less.

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If we take a look at the second quarter of 2016, what sticks out to me is the fact that there haven’t been any major changes since 2015, but it’s still a very strong seller’s market for homes that are 1,850 square feet or less. There are very low amounts of inventory for those homes—only 1.5 months’ worth—and it only gets to be a balanced market for the homes that are 3,500 square feet or larger.

The next line over on the graph shows the price change and the increase from 2015 to 2016, where the average appreciation rate of 9% has been driven more by homes 1,000 square feet and smaller. These homes saw an increase of 15%, but appreciation rates become lower for larger homes with the exception of the luxury market. Homes on the luxury market that are 3,500 square feet or larger saw a major increase in their appreciation ratings of 11%, compared to around 6% last year. On the last column of the chart, we see that the average number of homes under contract is currently floating around 55%.

If you’ve got any questions regarding our current market, interest rates or appreciation, please don’t hesitate to call, text, or email me at your convenience. It would be my pleasure to be a resource for you about anything real estate-related!

We Help You Get Under Contract in Multiple Offer Situations

We have some tactics that we use to get our clients here in Denver under contract in a multiple offer situation on properties they really want.

A thing we've started offering our clients that we really think is setting us apart is a home buying warranty when they purchase a home. It's mutually beneficial for both you and the seller because it guarantees that if your furnace, washer, dryer, or any other major things in the home break within the first year, they will be taken care of. It's also beneficial when positioning your contract to the seller because the seller understands that these things will be taken care of, so they won't have to worry about them coming up as inspection issues.

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You need every advantage you can get.

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Another thing we feel we do really well is put you in front of a solid local lender who has nominal rates, and will also put you through a pre-approval process rather than just a pre-qualification process. With the pre-approval, sellers will see that you've taken extra steps in your financing and that you're ahead of other buyers. It helps your offer stand out, and in this extremely competitive real estate market, you need every advantage you can get.

As always, if you have any questions, please feel free to reach out to me. I'd love to help you with any and all real estate needs.