Are we witnessing a surprising surge in Denver's attached home market despite soaring affordability challenges? It appears so. While many expected condo sales to stagnate under the weight of higher taxes, increased insurance premiums and rising HOA dues, November’s DMAR market trends report is telling a different story.
The condominium market is undeniably facing significant hurdles:
You’d think these factors would drive Denver home buyers away from the attached market and towards single-family homes, But here's the twist: Denver's attached home market is defying the odds.
Despite financial headwinds, there was significant increase in activity within the attached home sector in October’s data:
What's Driving the Surge?
Buyers are seizing opportunities in the attached home market, capitalizing on seller discounts and the dip in mortgage rates during September, which hit a 19-month low of 6.1 percent. This rate drop spurred a market-wide 2.35 percent increase in closed homes, 1 percent increase in pendings and a 1.57 percent decline in active inventory as buyers snapped up some of the stale listings. New listings, however, were down 7 percent across the market as would be sellers appear to be waiting for Spring.
Navigating the Condo Market Challenges
Understanding the financial hurdles attached buyers face is a crucial step in supporting their success. Agents need to present clear statistics on the escalating costs associated with condo ownership to set realistic expectations.
For Listing Agents: be proactive in your due diligence. Ensure the condo project is pre-approved for either warrantable or non-warrantable options. Working closely with a lender who can provide specific solutions for common issues is crucial. These issues might include:
Given the increase in attached activity, my team has been working closely with agents to pre-approve projects and navigate these hurdles with ease.
For Buyers' Agents: pre-vet the projects clients are interested in. If you're working with VA or FHA buyers, obtaining a Single Unit Approval can make all the difference. The Rueth Team goes the extra mile by getting entire projects approved. Having access to a strong and creative internal condo department, along with traditional and non-QM financing flexibility, supports a smooth closing no matter the market difficulties.
Why a Housing Crash Isn't Imminent
Apart from the attached homes data, one data point that jumped out at me for October was the resilient home price increases. The average close price increased 5 percent for residential, 4 percent for detached and 2.3 percent for attached. Looking at Year-to-date average home prices in Denver, they are increased 3 percent year-over-year. Median home prices year-to-date increased 2 percent year-over-year. Even with inventory levels dating back to 2011 and higher for longer mortgage rates, home prices continue to remain strong. This will keep the affordability conversation alive and well. Yet, despite affordability challenges, a bubble continues to be unlikely as:
These factors along with a record breaking $32.8 trillion in homeownership equity, provides a cushion against widespread defaults that typically precede a market crash. Homeowners with low fixed rates are less likely to sell, restricting supply and keeping prices stable. Additionally, lending standards have remained tight since the last housing crisis, meaning buyers are more qualified and less likely to default.
Seizing Opportunities Amid Volatility
The recent dip in mortgage rates provided a glimpse into how quickly the market can shift. That temporary drop to 6.1 percent significantly improved affordability, sparked buyer demand and the effects were immediately visible in the data. It serves as a powerful reminder that in every market—no matter how challenging—there are windows of opportunity.
Let's Move Forward Together
Whether you're an agent guiding clients through these complex times or a buyer looking to make your next move, let’s embrace the opportunities that exist in today's market. Feel free to reach out with any questions or for personalized advice. Together, we can turn challenges into successes and find the right path forward in any market environment.
Until next time, this is Nicole Rueth proud sponsor of the DMAR Market Trends Committee and Market Leader with Movement Mortgage.
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