Denver Real Estate Market Update | October 2024

Are New Homebuyers TOO LATE?

Are new homebuyers already too late? As home prices remain high and interest rates begin to cool off, many buyers are still waiting for that perfect moment. But here’s the big question: Is waiting going to cost more in the long run? In today’s video, I’m breaking down the realities of the housing market, especially here in Denver, and answering whether homebuyers should jump in now or wait for better deals.

Before we dive in, hit that thumbs up and subscribe to the channel! And let me know in the comments, what’s your prediction? Will home prices fall, or will waiting just make buying a home even more expensive?

The State of the Denver Market – High Inventory, Low Turnover 

Let’s talk Denver, because the data we’re seeing here is interesting. Per the DMAR Market Trends data for September, active listings in Denver reached their highest level since November 2011, Median Days on the MLS hit 25, up 19% from August and 79% from last year, and Close-to-List is hovering at 99%, all of which would typically signal a buyer’s market, right? More homes to choose from sitting on the market longer should mean less competition. But here’s the kicker: September’s new listings were the lowest we’ve seen for a September since before 2015, excluding 2023.

This low turnover isn’t just a Denver trend—it’s a nationwide trend as well. According to recent data, only 2.5% of U.S. homes changed hands in the first eight months of 2024. That’s the lowest rate in decades! In Denver 2.9% of homes changed hands in 2024 compared to 4.2% in 2019. People are staying put, largely due to elevated mortgage rates locking them into their current homes. So while we have more active listings, many of those homes are stale listings that haven’t moved, especially those that need a little extra work. This means buyers have increased negotiating power right now, but it won’t last forever.

Homeowner Equity at Record Highs – A Safety Net for Sellers 

One of the reasons we aren’t seeing more highly desirable homes come on the market is that homeowner equity has hit an all-time high. Homeowners in the U.S. are sitting on their largest share of home equity since the 1950s. According to the Federal Reserve, 72.7% of owner-occupied real estate value is tied up in equity—72.7% is an absolutely huge cushion.

In Denver, where home prices have soared, many homeowners are in a position where they don’t need to sell, or if they do, they have plenty of room to negotiate. The average homeowner’s equity is around $315,000, which is almost $129,000 more than at the onset of the pandemic and a lot of security even if the market does dip slightly. Even if home prices were to drop 10-20%, most homeowners would still be in a strong position, keeping the supply tight.

Buyers Waiting for Rates to Drop – The Risk of Spring Competition 

Now, I know a lot of buyers are sitting on the sidelines, thinking, “Let’s wait for rates to drop further, maybe in the spring.” But here’s the thing: the market doesn’t wait for anyone. While pending home sales in Denver are up 3.64% month over month and 25% year over year, we’re still seeing lower overall transaction volume compared to pre-pandemic levels.

This slight uptick in pending sales along with 6 straight weeks of increasing mortgage purchase application data, reflects that demand is creeping back in. But the buyers who are waiting for rates to dip below 6% might be setting themselves up for a rough spring market. Why? More competition. Historically, spring is when inventory tightens, and demand surges. If you wait for those lower rates in the spring, you could end up paying more due to increased competition for homes.

Housing Turnover & Affordability Challenges

Let’s not forget the bigger picture here: turnover is at its lowest point in decades, with just 25 out of every 1,000 homes changing hands in 2024. The lock-in effect, where homeowners are sitting on ultra-low mortgage rates, is keeping turnover at rock bottom. And the challenge of affordability isn’t going away, even with slightly lower mortgage rates and increased aging inventory.

Although rates have dipped from the 8% highs we saw in October 2023 to around 6.2% now, the affordability challenge is still significant. We’re seeing some stabilization in pending contracts and demand, but the reality is that affordability hasn’t drastically improved. If you’re waiting for a major drop in home prices to balance this out, it’s unlikely to happen.

What’s Next for Mortgage Rates? 

So, what’s going on with rates? The big question on everyone’s mind is, are rates going to keep dropping? Well, 2024 forecasts are pointing to mortgage rates staying between 5.75% and 7.25%. That’s a wide net with most economists thinking we’ve seen the lowest rates for the year. But we do have the wild card I went deep on in last week’s video: improved mortgage spreads.  As spreads return to their historical norms, there is a chance we could see rates go lower still.

However, rates are unlikely to drop much without major economic changes, like a significant softening in the labor market or a dovish turn from the Fed. Economic data, especially jobs data is still strong, with recent initial jobless claims dipping to a 4-month low and improving job openings over the last few months. And as for a dovish Fed, Fed chair Powell is adamant that there is no need to rush cutting rates as confidence in the economy grows.  Which ultimately means there’s pressure on the housing market to stay elevated. If you’re banking on significantly lower rates in 2024, you may be waiting for something that won’t come.

The Perfect Time to Buy in Denver

So, what does all this mean for homebuyers in Denver? If you’re trying to time the market, now may be your best window. Inventory is higher, competition is lower, and sellers are more willing to negotiate. In fact, the end of September and the start of October might just be your sweet spot. If you wait for rates to drop further and try to jump in during the spring market, you’ll likely face much fiercer competition, which could drive prices up and make buying more expensive in the long run.

So, to answer the big question: Are new homebuyers too late? The answer depends on your timing and your personal finances. If you’re personally ready to buy, now could be your moment, but if you wait for rates to drop further, you may find yourself in a much more competitive market come spring. Remember, even if rates drop, increased competition can negate those savings.

If you have questions about the Denver market, or if you’re considering buying a home throughout the United States, drop a comment below, and let’s chat. Hit the like button, subscribe, and share this video with someone who’s also navigating the housing market right now.

Well, that’s a wrap.  This is Nicole Rueth with the Rueth Team of Movement Mortgage and proud sponsor of the DMAR Market Trends Report and your August Update. I’ll see you next time.

Nicole Rueth
SVP, The Rueth Team Powered by Movement Mortgage