How Has the Market Shift Impacted Your Denver Home’s Value?
Many Denver Metro homeowners worry about recent real estate headlines and talk of housing value declines. You may wonder, "Will the value of my home plummet?" — especially if you plan to sell your home in the coming months. How is the Housing Market in Denver fairing among all the recent changes?
The Denver Housing Market is Cooling - But Is It a Market Crash?
Persistent forecasts of a housing downturn in the real estate market may make you hesitant to list your home for sale. And with mortgage rates rising, the pool of potential buyers seems to be dwindling, too. When fewer buyers are on the market, sellers often have to adjust home pricing to attract those who remain.
Right now, since mortgage rates have basically doubled over the past year, the monthly payment for an American family buying a median-rpcied home increased by roughly 70%, according to Redfin. So a lot of the home buyers that were willing and able to buy last year have simply been priced out of the market right now and are waiting on lower interest rates.
You might also wonder if real estate market conditions are so bad that you won't be able to sell at a good price. Should you hold off selling altogether and wait for better times to return? Is this a market crash?
It's worth examining these conditions in more detail. Let's dive into what's really happening to U.S. real estate beyond the sensationalist headlines.
Why Deceleration in Home Pricing Does Not Mean Depreciation in Home Values
You've likely been hearing about decelerating home prices. What is that and what does that mean to home values? There's no denying that the real estate market realities in 2022 differ from those in 2021. The U.S. real estate market has gone from a year of record-breaking home price growth (the 20-percent home value increases are now legendary) to a decline in home price growth. In fact, according to Redfin, homes have sold for less than asking for the first time since March 2021.
Does this downward trend in home price growth signal a depreciation in home values? The great news for sellers is that it does not.
The main difference between home prices and home values is that home prices fluctuate over the short term, depending on economic forecasts and unforeseen circumstances that influence the economy. A home price is the price buyers are willing to pay for a home due to several variables. We see seasonal shifts in home prices here in the Denver Metro market - typically with home prices starting their climb in early spring and starting a decline in late Fall. This is normal and natural for our market.
On the other hand, home VALUES fluctuate much more slowly over longer periods. A home value is more stable over time, depending on the size and type of house you have, its condition, and its location. Home values in some areas will be relatively impervious to short-term economic shocks, while less economically stable areas may experience more significant fluctuations during challenging times.
Hiring an experienced local real estate agent will help you determine how much the current conditions might affect your home price and whether you should sell right now or hold off for a few months.
Why 2022 Is Not as Bad for Home Pricing as Everyone Thinks
The past three years illustrate this point perfectly. Home prices rose at unprecedented rates during 2021 mainly because no one was selling during the Covid shutdowns of 2020. Pent-up demand for homes combined with a decimated inventory of for-sale listings caused home prices to skyrocket to levels never seen before. There weren't enough homes going around, leading to a buyer frenzy.
By contrast, 2022 has been a relatively tough year for the real estate market. The U.S. economy is slowing due to several factors, including rising living costs, inflation, and mortgage interest rates, making housing less accessible to buyers.
However, it's crucial to put this slowdown into a longer-term perspective. If current real estate market conditions are compared to other years in the past decade rather than the outlier year of 2021, things begin to look markedly less alarming. In fact, some analysts are "ignoring" 2021 because it was such an outlier.
Home sales went down in 2022, but only 0.9% compared to the average volumes over the past eight years. If we look at data from the National Association of Realtors, 2013 and 2014 were substantially slower years for real estate, while the current levels of home sales are only slightly lower than the 2018-2019 pre-pandemic levels.
Why is this data set significant? Most importantly, it indicates that home demand remains strong despite decreasing home pricing growth. This fact will keep home values high for a long time to come. It's crucial to note that home prices are not falling at the moment: they are still increasing — just at a slower rate than the outlier 2021 rates.
So, while the housing market may be slowing down, it has not entered the much-rumored downturn phase.
If you're thinking about selling and want to discuss your specific situation - reach out and let's chat. I have several tools in my toolbox to help make this a positive experience for you! You may also like our recent post about Expert Predictions for the Market.
Cher Revolinski EXP Realty 303-884-2738
The Housing Market and Your Home
So, "Will the value of my home decrease?" No, not anytime soon. While you may need to adjust your home pricing expectations as a seller, it is doubtful you will have to sell below market value. In 2022, you will still profit from selling your home because of rising home values.
Contrary to alarming news headlines, the housing market is not about to collapse. When you work with an experienced real estate agent, you can price your home realistically in a way that still benefits you.