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Denver’s housing market remains strong, despite uneasiness over the novel coronavirus and changes from the Federal Reserve’s emergency rate cut.
February was a strong month for Denver’s housing market, according to the latest Market Trends Report from the Denver Metro Association of Realtors. It saw an increase in new listings, average sold price, and the number of homes sold. Compared to January 2020, new listings were up 5.56 percent, home sales were up 3.16 percent, and the average sale price hit $544,054, up 2.51 percent. Additionally, median days on the market were down to 12 days in February, compared to 27 in January. That’s a whooping 55.56 percent decrease, signaling that buyers are snatching up homes at a much quicker rate than at the end of 2019.
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DMAR Market Trends committee member Andrew Abrams says that as of right now, the coronavirus has not impacted the housing market, as inventory continues to outpace demand. He added that if buyers’ motivation decreases due to public health concerns, it could shift the balance of the market away from the seller’s favor. However, “with the lack of inventory and current buyer demand, it would take a significant amount of time for that shift to occur,” he says.
February ended with only 4,835 active listings, which is down down 2.15 percent from January and 19.64 year over year. But Abrams says this drop isn’t as much as one might think. The decrease from the previous month is only a slight change from 2019, when inventory increased 2.31 percent from January to February. Abrams believes the biggest factor at play for this shortage of inventory is the record-low interest rates.
“Buyers are incredibly motivated to buy now and many sellers are hesitant about putting their house on the market with the uncertainty of where they will be moving, causing a cycle of low inventory and high demand,” he says.
While Denver’s housing market may be somewhat insulated from the spreading coronavirus panic, it will be impacted by the Federal Reserve’s emergency rate cut. According to Nicole Rueth, producing branch manager of the Rueth Team in Denver, the cut of a half a percentage point made earlier this month was intended to help lower the cost of borrowing in order stimulate the economy and avoid a major economic slowdown caused by the coronavirus.
Because Denver is already experiencing a tight seller’s market, this cut could potentially exacerbate that situation. However, Rueth said that as 8.8 to 9.2 million first-time homebuyers expected to enter the market in 2020 and 2021, lower rates should be a good thing. “There is a significant benefit of lower mortgage rates for homebuyers; there is an equal benefit for current homeowners,” she says. These rates could save current homeowners hundreds of dollars a month, which would alleviate budgetary stress or lower the term of their existing mortgage.
Because of this, the rate cut for Denver will keep the purchase market hot while also putting more consumer dollars into the market. And that—at least for now—should keep the housing market going strong even as many aspects of life in Denver are put on hold.