The nation’s stark lack of affordable housing options is becoming more apparent as the Spring home-buying season closes in. Almost 100 potential buyers toured a single Denver listing over the span of three days, and this fierce competition is bound to get worse as interest rates rise, and Spring finally arrives.
- One $500,000 Denver listing had almost 100 tours in three days
- In January, there were 26% fewer homes for sale in Denver than a year prior
- Multiple offers are expected, and all-cash offers are frequent in the nation’s hottest housing markets
Buyer demand is rising out of control in some of the nation’s hottest housing markets. This growing demand is manifesting extreme competition in markets like Denver, where hundreds of buyers are competing for average homes.
“There is simply just too much demand right now,” said Martin Mata, the Redfin agent showing the three-bedroom, two-bathroom home. “There is just not a lot of affordable housing here in Denver, and we have a really good economy, so a lot of people are still moving here.”
Low housing inventory has been pushing prices higher for the past two years, and this year will not be much different. There were about 26% fewer homes for sale in Denver last month. The national housing supply is about 10% lower than a year ago, sitting at a mere 3-months’ worth of available supply at the current sales pace. A six-month housing supply is the benchmark for a balanced housing market.
Denver’s robust economy is attracting plenty of buyers to the booming capital, even in the home-buying off-season. This increased activity has forced potential buyers to expect to face multiple offers, including numerous all-cash offers.
“It’s kind of the off-season right now, but I’m still experiencing a decent amount of competition,” said Brittany Storoz, who has been looking for a home in Denver for a few months. “I thought I was at a higher price point where it would be a little bit easier for me to get a place without a lot of competition, but I’ve put down two offers so far and both times been beaten out by cash offers.”
In addition to the pressure of competing against multiple offers for every home, many buyers are looking to settle down before interest rates rise further. The average interest rate for the popular 30-year fixed-rate mortgage is up 50 basis points since the start of the year, and The Fed already foreshadowed more rate hikes within the year.
“In the short term, I strongly believe that is going to cause a lot more buy-side demand as people try to get into a home before interest rates get to a point where they can no longer afford a home they would like,” Mata said.
Interest rates are a concern for some buyers, but others are simply concerned with the exorbitant homes prices. Most sellers fear they will not be able to find another affordable option in a market where hundreds of people are interested in almost every home.
“I think that our biggest concern is before interest rates, just being priced out,” said Shannon Knight, who is currently renting and has been looking to buy for seven months. “So we will look at a place for sub-$500,000, and it will go on the market and have 100 showings a weekend, and it’s just impossible for us, so the interest rates don’t bother us as much as even being able to see the house.”