Three Guiding Principles for Our Shifting Market
Let’s step back from the crazy headlines and talk about what’s going on.
By now, you have probably heard that the real estate market is slowing down. The headlines are all over it.
To fully understand this current shift, we need to take a look back.
For years now, the market has operated like clockwork, taking off in the spring - buyer demand accelerating into the early summer, before cooling off during vacation and back to school season. This gave margin for the market to mostly plateau and breathe in the fall and winter, before taking off again in the spring.
Then the global pandemic happened.
Interest rates hit historic lows (in the 2.5% range) and the changing landscape of working from home, online education, and reduction in social events pushed countless people to take advantage of this almost-free money and move up into something more suitable for their new lifestyle demands.
The low rates plus increased buyer demand launched home prices to the moon, with homes seeing approximately 20% appreciation for two years in a row (average Denver metro home prices climbed from $519,000 to $819,000 between April 2020 and April 2022).
Homes were commonly get 20+ showings opening weekend and were commonly selling for $100,000 over asking price.
That’s not normal.
The government decided this pace was unsustainable, so they responded by sending interest rates into the fastest, steepest rate increase in 40 years, with mortgage rates climbing from 3% to 6% in just a few months’ time.
That brings us to our current shift.
The climbing rates exponentially decreased buyers’ purchase power, meaning to buy an average Denver home, the monthly payment was now going to cost roughly $1,000 more per month than it would have just months prior.
So, is that all bad news?
No. It has some bad in it, but it’s not all bad.
HERE ARE 3 GUIDING PRINCIPLES FOR UNDERSTANDING OUR CURRENT MARKET SHIFT.
1. Real estate is going to be fine.
People always need a place to live. A roof over your head can’t go out of style. Market movement like this can make people nervous, and that’s understandable. In our situation, the previous pace was unsustainable, and so this slow down and shift is a welcome relief. This current shift is making the market more stable and manageable.
2. The market is a lot like climbing a 14er.
When climbing a mountain, sometimes the hike is steep, other times it’s level, and other times your path dips a bit. But when you zoom out to see the whole mountain, the overall trajectory is up. Real estate has proven to be the same way. Home values will have their short term ups and downs, but over time, values show predictable, positive growth.
3. Real estate is a dynamic market.
The market is always shifting - sometimes in the seller’s favor, and other times in buyer’s favor. It’s fun to sell for red hot prices, but buying a replacement home in that same market can prove demoralizing. As people’s lives change - new jobs, growing families, death, divorce - these needs will always keep the market moving.
In every season and shift, there are advantages and disadvantages. The key is to understand the market and make a smart decision that works for you.
We hope this content serves you well as you seek to be savvy homeowners and make wise financial decisions for your future. If you'd like to chat further or are considering moving in the coming months or year, let's get a meeting scheduled today!
Josh & The RAGE Team
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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
