As Colorado real estate prices continue to increase, the first quarter of 2021 represents an opportunity for buyers who have financing ready. Many people have asked me when I expect prices to drop due to the current economic climate. In my opinion, prices will not drop during the first quarter, and I would not wait for a decline. Instead, I would get ready to purchase and then pursue a search for the ideal property.
According to the DMAR (Denver Metro Association of Realtors), a tight market where listings are down 51 percent from a year ago is driving prices up by 13 percent year-over-year as of December 2020. As sellers have waited to list their homes until after the holidays, I think the first quarter of 2021 is an ideal time to take advantage of historically low mortgage rates and enter the market.
Prices are Rising Due to Increased Demand Chasing Fewer Listings
According to DMAR, the greater Denver metro housing market saw a historically low 3415 active properties for sale at the end of November 2020. For single-family detached housing, the 1755 available houses represented about two weeks of inventory. The higher-end market of properties priced at over $1 million was the most active as buyers were looking for more space, inside and out. I expect that this tight market will continue, driving prices up further as demand for spacious up-scale housing remains high. While low financing costs mean buyers can afford more expensive homes, I think the continuation of low mortgage rates will be a factor in driving property prices even higher in the future.
How to Prepare for Successfully Acquiring a Property in Q1
The key to acquiring a property in the current Colorado market is to move fast but avoid the market frenzy by steering clear of houses in their first week on the market. According to DMAR, the average time a detached property spends in MLS has declined more than 50 percent from a peak in January 2020 to 20 days in November 2020. That’s less than a month to get from making an offer to closing the deal.
In my opinion, you first have to establish how much you can pay, and you have to be clear about the risks you are willing to assume. Factors for successful property acquisition include the following:
- Find out how much you can afford and get the financing finalized. You may be competing against buyers who can pay cash. Having financing secured neutralizes their advantage.
- Research the market and market niches to find out where you fit in. Some neighborhoods may be more competitive than others near-by, and you may have to compromise on some aspects of your ideal property.
- Decide on an acquisition strategy. Some buyers waive appraisal and inspection to pave the way for a smooth closing. Identify what risks you are willing to take on and define how you want to structure the bidding process.
The best way to a successful acquisition is to identify a property that suits your requirements and move quickly. In the present Colorado market, houses don’t stay listed for very long. If you make an attractive offer above list price with a minimum number of contingencies, that will help seal the deal in today’s competitive market and assure the seller of a smooth and profitable transaction.