If you live in Denver and own your home, I am sure the thought of selling and taking the profit has crossed your mind over the past few years. Denver has been in the news many times touting year over year, double digit appreciation. Some analysists say that Denver has appreciated 49.1% over the old record high pricing, reached in the first quarter of 2006. If you are like me, you have spent a slow morning at work doing the math on how long you can live in Mexico with the money you will make when you sell your home.
Here are 5 important reasons why 2017 is the year you should sell if you have been thinking about it. But before we jump in, you will not hear me saying that the market will drop next year or that you won’t make money if you wait to sell. I just want to point out the most compelling reasons why 2017 will be the easiest year to sell your home in the quickest amount of time for the most money. This is the Seller’s dream.
I know what you are thinking, “what do interest rates have to do with me? I am selling, not getting a loan!” Yes, you are selling, but the buyer who is looking at your home has a cap on what they are able to pay. As we mentioned, Denver houses are not as cheap as they used to be. Buyers need as much money as they can qualify for, to purchase homes at this price. For every 1% increase in interest rates, the buyer takes a 10% cut on what they can purchase. That means if interest rates climb from 4% to 5% (this is already well into fruition) and you want to sell your home for $400,000. The group of people who could buy it last year for $400,000 can only afford $360,000 this year. This means your pool of potential buyers just decreased significantly. Every time the buying pool for your product (your house) decreases, it becomes harder to sell your product.
Playing off point #1, we have all heard that Denver is quickly becoming the “next San Francisco”. While I (and the numbers) don’t believe it is that extreme, there is a strong case to be made that future generations will not be able to continue to pay the increased prices for housing in Denver. While the tech jobs moving to Denver are helping to boost the average income, there is already a gap between what the average family makes and what the average home costs in Denver. If we continue on that trend, fewer and fewer people will be able to purchase your home. That will make it harder and take longer to sell your home for the price you feel it is worth.
You may or may not have heard the term “high plateau” being thrown around outside of country music and western films. The Denver Post published this article in July of 2016, describing what the culmination of the above ideas will do to the housing market. While no one is saying the market is crashing, a few economists think it is likely that a house sold in 2017 will be worth the same amount in 2021. If you are looking to buy, that isn’t the end of the world, but it isn’t the market we have experienced in the past. If you are looking to sell, the time value of money alone tells you that in 5 years, your house is no longer the investment it was when the market was appreciating.
There is no doubt that recreational marijuana has had an effect on the housing market. It has been written about again, and again, by many news sources. The unknown question is, as more and more states legalize recreational marijuana, will the massive influx of transplants moving to Denver begin to look to other states for relocation. There are now 8 states that have legalized recreational marijuana in some form. That means that transplants moving because of marijuana now have 8 choices to relocate to instead of 2. If Denver is among the most expensive places to own a home, many people will choose to move elsewhere. This again, lowers the buying pool and means your house will take longer to sell and may not go for as much money.
Supply and Demand
All of these points are smoking guns that lead to the one central idea that drives economic factors. Supply and demand. While Denver houses have been heavy on the demand side of the past 4-5 years, there is evidence that shows this trend slowing over the next few years. Additionally, builders are starting to catch up with the backlog of demand that has tightened the market and driven up pricing. As of January of 2015, building permits hit a 10-year high. Those projects are hitting the market and loosening the supply. In 2016 building permits are up 75% over 2009. That means you will soon have a lot of competition when selling your home. Not only will there be a lot more homes on the market, many of these homes will be new and come with all the bells and whistles.
So, that is a lot of information to digest. As I mentioned at the beginning of the article, no one believes we are in a bubble. Just because we aren’t in a bubble, doesn’t mean smart money isn’t on selling. All the points above lead me to believe that 2017 will be the year to sell. This may be the last year we have large gains in appreciation, multiple offers on most homes and buyers who are willing to overlook many of your homes issues in order to get into a house. The market is still red hot for Sellers, but I can’t confidently say that will be the case come 2018. If you are thinking of selling, you owe it to yourself to look into it now. This may be the easiest year to sell your home for the most amount of money, in the least amount of time.
If you are considering a move, feel free to call us at Bring Home Denver at (720) 443-3536 or stop by our website at www.BringHomeDenver.com. You can also email me to tell me you disagree about any or all of the above statements at Garrett@BringHomeDenver.com.