HEAVEN AND HELL
While I’m sure we could have some very interesting conversation about the choices we all make in our daily lives and how those are might play out in the after-life, this is just about life here and now. We’ve all heard that Heaven is what you make it here on Earth, so it’s fair to say that the same could be said about Hell. But there is much that we have little or no control over in our daily lives that would make it seem like we’re heading in one of those directions, or the other.
It doesn’t take great imagination to see where this is going. That is, unless you’re comfortably enjoying the home you bought some time ago and have very little interest in what’s happening in today’s real estate market. If you are not that person, or you are and you are tuned into the conversations of family members or friends who are in the process of selling a home, buying a home, or both, then you’ve probably heard market descriptors such as crazy, insane, ridiculous, or even tragic. “Great” and “awful” are two also relevant terms, though less dramatic, and intentionally polar-opposite. And all of that is the real estate reality today.
I’ve been a full-time real estate professional, notably, a Realtor, for more than three decades. I’ve sold real estate through the Oil Bust of the 80s, the Dot-com boom and bust of the 90s, into the early 2000s, climaxing with the 9/11 attacks that dramatically spiked the US economy at that time. Then a slow steady recovery ensued until subprime lending and other nefarious behavior on Wall Street crashed us into the Great Recession that lasted from 2008 into 2012. At that time we saw record foreclosures and dropping home values of around 25% across Denver metro and Foothills. A HUGE government stimulus package, along with Prime interest rates cut literally to zero at one point, jumpstarted a recovery that eventually gained tremendous steam that was abruptly halted one year ago by the covid-19 Pandemic, which lingers yet today. You could say I’ve seen it all.
Oh, but no. A perfect storm has now beset us. In the words of Winston Churchill, we are in a riddle, wrapped in a mystery, inside an enigma.
We’ve observed businesses, big and small, suffering and failing, employment tanking, schools closing, government offices and really almost all offices flailing to function with reduced staff, working from home. But most curiously, real estate is skyrocketing! And that for reasons so various and sundry that I could do an entire article on just that, but for brevity’s sake I’ll just leave it at “Perfect Storm” for better or for worse. Well, this boom is great, even heavenly, for all those who have owned real estate for the last 10 years, or 20 years or 30 years due to real estate values always trending upwards. But now more than ever it’s truly heaven… Or hell if you’re a first-time home buyer, or wanting to downsize, or even make a lateral move in the Denver area, including our foothills communities that traditionally lag a little behind the flatlands in overall vitality. When I look at the numbers today and see critically low inventory, combined with an influx of cash heavy buyers from California, Chicago, and the East Coast, and a steady flow of companies moving in with high paying jobs. And I’m truly taken aback. We are having a housing crisis!
As I write this, the average sale price-to-list price ratio for the last 30 days at 103.2%! I see average days on the market at 16 and the median is just 4 days. In Jefferson County there are at this moment only 131 single family homes in all price ranges, yet at the same time there are 650 homes under contract, and that’s for over a quarter of a million households. More than 80% absorption of inventory is what you would call a seller’s market on steroids! These are all-time records. Unprecedented. And it’s not because the sales numbers are skyrocketing as much as that the inventory is being bought up without replacement inventory coming online, and prospective buyers can and will pay the premium to get a home. But again, sadly, not all prospective buyers can compete.
So while home sellers are rightfully jubilant, there is a dark downside to this so-called “up” market. Besides the obvious, those folks who are ready willing and able to buy a home, but unable to actually get one as prices rise out of sight and rising interest rates further diminish buying power. There’s another, socially devastating, though less obvious, factor gaining significance too. That is that the division of classes in our country is widening rapidly. The “haves” ha
ve more real estate and control of housing dividends, while the “have nots” are, in greater numbers, stuck paying (ever-increasing) rent, perhaps for the duration of their lives. More and more residential real estate is being scooped up and held as investment property because the low interest rates we’ve been enjoying, combined with rising rental prices, have made it more lucrative than ever to be a landlord. Many families and individuals who are buying “up” now hang onto and rent out their current home as part of their retirement and wealth-building strategy. As a result, this market is literally starved for homes for the current buyer needs. So, say all you want to say about developers, but if homes can’t be built then not only do prices continue to rise out of reach, but local businesses suffer because they must pay higher wages so their workers can simply afford housing. Then, to stay afloat, those businesses have to raise their prices to their customers and it’s all just a vicious cycle.
I network with a lot of very smart and very successful businesspeople a
nd none I’ve spoken with have a solid idea of where this is going long term, or what viable solutions there are in the short or the long term. The only relief valve so far has been the building of tens of thousands of apartment units all over Denver, which at least gives some people affordable housing opportunities. However, renting doesn’t work well for growing families, families with pets, and actually just the many people who aren’t apartment dwellers by nature. And of course, there’s no equity gain for all that monthly outlay.
The greatest opportunity in this market is that of sellers to liquidate any unwanted real estate, or to upgrade from a medium, or somewhat luxury home, to a significantly more luxury home where the market is slightly softer. Many are also taking advantage of this time to “move back home” to states where they can get a lot more house for their money and perhaps a slower-paced lifestyle all around. For buyers, this will be an exercise in persistence, along with accepting more concessions than you will like. But, owning is better than renting in the medium to long run, and these market conditions are unlikely to subside anytime soon.
Your “Home” Team wishes you all Happy Homes, whatever it takes.