Highlights of a competitive housing market

Real Estate

Highlights of a competitive housing market

The nationwide housing market has been surprisingly strong throughout 2020. That said, some cities are experiencing higher demand than others. Denver is one such city. Earlier this year, median sale prices for condos and single-family homes each experienced record highs, reaching $510,000 and $334,752, respectively. This means that Denver is one of the most competitive housing markets in the entire country. Several factors are contributing to this. Take a look to see if the recipe for a competitive housing marketing applies to your next investment.

1. Limited inventory

In September, Denver's housing inventory was close to half its usual size, leading to an uptick in competition. That month, there were 3,041 single-family homes available for sale, down from the previous low of 5,693 in September 2017. So it's not surprising homes are being bought quickly -- the median number of days on the market has fallen to a record six. By comparison, the previous record was nine days in September of 2015 and 2016.

Of course, limited housing inventory is a national trend this year. Many property owners have held off on listing their homes due to the uncertainty brought about the coronavirus pandemic, but the result is the same: Limited supply is only fueling demand.

2. High demand

The basic laws of supply and demand state when a commodity is in short supply, demand automatically rises. But that's not the only reason why Denver's housing market is so hot.

Right now, mortgage rates are sitting at historic lows, with the 30-year fixed loan holding steady at well under 3% since summer and the 15-year fixed loan hanging tight at under 2.5%. Prospective buyers are therefore eager to get their hands on homes to secure these great deals, which is leading to a total demand crunch -- not just in Denver, but throughout the country.

3. Unique value propositions

Competitive housing markets tend to offer local benefits other areas don't. For Denver, those include glorious scenery and relatively spacious homes with proximity to ample amenities. By contrast, a number of big cities (notably, Manhattan and San Francisco) are struggling with home sales now as buyers seek out added square footage and space to spread out, since working from home is a continuing trend. Other value propositions that lend to buyer demand include nightlife, low crime, and highly rated schools.

How to navigate a competitive housing market

From an investing standpoint, hot housing markets pose a challenge. While you could make money with an income or investment property, you could also wind up paying a substantial premium for that property that can eat into your bottom line. A better bet is to seek out housing markets on the verge of being competitive but not quite there yet. That way, you can get in when home prices are moderate and benefit when they begin to skyrocket.

In fact, that's why it's so important to know the recipe for a competitive housing market -- so you can get in at just the right time, get a relative discount on the property (or properties) you're buying, and then make a killing through rental income or resale.

Jul 11, 2022 Market Trend