A cadre of experts from various segments of the real estate industry agree that what we’ve seen in the housing market over the last year has been a “perfect storm” that caught everyone by surprise.

The Denver Gazette assembled a group of knowledgeable panelists, including Usaj Realty managing broker Jenny Usaj,  from the residential real estate, home building, home financing, and investment industries to discuss the challenges of buying a home, why we are seeing explosive growth, and what we can expect in the future.

The median price of a single-family home is now $595,000, up almost 27 percent over last year. Days on market in May were 11; last year, a home would typically be on the market for 23 days before going under contract.

Even attached homes (condos and townhomes) are ticking up in price after a slow start in 2021. The median price for an attached residence is $380,000, reflecting a 16 percent increase over 2020.

Adding to the home buying challenges is the fact that May 2021 set a record to a new low in the number of listings — 2,075. For reference, May 2006 posted the record-high of 30,457.

So why is this happening?

“During the pandemic, people were forced to spend a lot of time at home,” said Usaj. “After the initial fear and concern about what would happen, people began to focus on improving their lifestyle and figuring out how they could improve their living situation. Following months of not spending money, and deciding to take advantage of stimulus money and savings, people started feeling like it was either time to move into their next home or renovate.”

And this need for change became a nationwide phenomenon as people began working remotely and discovering they could live anywhere they wanted. With huge cash reserves in their pockets, Colorado has witnessed droves of people from California, Texas, and the East Coast eager to make the Centennial State their new home as they view the current market conditions as a “deal.”

In addition to people’s desire to improve their live-work environment, the housing frenzy has been fueled by historic low mortgage rates. For the last year, 30-year mortgage rates have remained under 3.2 percent which has provided the financial incentive to not only buy, but buy more home than in the past.

In addition to people’s desire to improve their live-work environment, the housing frenzy has been fueled by historic low mortgage rates. For the last year, 30-year mortgage rates have remained under 3.2 percent which has provided the financial incentive to not only buy, but buy more home than in the past.

Charlie Farrell, CEO of Northstar Investment Advisors, explained that this  “free money” has lured industrial investors into the fray as well, which in turn has further depleted the housing inventory.

“Industrial investors have jumped in the residential real estate market because they see this as a way to generate income and cash flow,” he said. “They are looking for products that can generate income over a long period of time. With their enormous lines of credit and financial backing, they are able to buy up residential properties and rent them out. This takes even more inventory off an already depleted market.

“And unfortunately, I believe that residential real estate around the Denver area is going to stay expensive for a while. Previously, this market had been largely ignored and now I believe the interest is here to stay.”

As a result, people should be prepared to become innovative when it comes to getting into the real estate market. He suggests looking at your finances and figuring out where you can drum up the cash for a down payment.

“The stock market is up 40 percent since the pandemic,” he pointed out. “If you own an IRA or have a 401K, you have some flexibility in tapping into those resources by paying it back over time. Or, you may have friends or family who may be able to lend you money. There is no question that housing is expensive but the reality is that it’s likely to get more expensive. You’re going to gain equity over the long term so it’s better not to wait.”

Potential home buyers should also keep an open mind and not hesitate when getting in line on new construction homes. Matt Rankin, VP Operations for Taylor Morrison Homes, acknowledges that home builders are still playing catch up with home inventory and building materials.

“We are still facing some challenges in the production and supply chain but hopefully, we will soon be seeing some relief,” he said. “If people can be patient and know that things will start to open up in 6-9 months, you’ll be able to find a house you like. It’s important to get in the door now, book an appointment at a sales center, and get pre-qualified.”

In addition to new homes coming on the market, President Biden recently extended the federal eviction moratorium until July 31, 2021. This will provide homeowners extra time on mortgage payment options for another month, but ultimately, some of those homes will go into foreclosure.

“Once the moratorium is lifted, some people will still be unable to make their payments and that inventory will hit the market,” said Dan McMahon, Home Finance director for the Colorado Housing and Finance Authority (CHFA). “While the number of homes falling into foreclosure isn’t great, it will still somewhat boost inventory.”

All in all, we may be facing a new reality of residential real estate in Denver. It’s not the “old” Denver anymore and is unlikely to return to “cowtown” status.

“Many people now have the luxury of being able to work from wherever they want,” said Usaj. “Jobs used to dictate where people live. Not anymore. The Denver lifestyle is here to stay. It’s not a secret anymore and people want this lifestyle.”