Why Experts Are Saying 2022 Could Be The Year to Buy
It’s no joke the Denver real estate market has been bananas. Or as Gwen Stefani once put it, B-A-N-A-N-A-S” (truer words have never been spoken). Yes, historically low mortgage rates, a new wave of generational homebuyers, years of under-building and pandemic-induced remote work (enabling folks to live/work wherever), created a perfect storm of record price growth and crazy competition.
No one ever thought Denver’s average home price would reach over $700,000. But here we are.
Understandably, a lot of homebuyers are put off by sky high prices and unfavorable buying conditions. And while I won’t promise rainbows and sunshine, the data is telling us 2022 has some noteworthy upsides to buying. Here’s 3 reasons to consider buying now in one of U.S. News & World Report’s best places to live:
Rates Are Still Low
Probably one of the most motivating things to buy now: interest rates are still at historic lows, but are expected to increase several times over 2022. Increased interest rates don’t just translate to higher monthly mortgage payments. Overall, it impacts how much you can afford. It’s estimated that for every .25-.5 percent increase in rates, it can impact your affordability by roughly $25,000. For instance, a $1 million home, at a 2.5% interest, has almost the same monthly payment ($3,950), as an $800,000 home with a 4.25% rate ($3,936).
There May Be a HIGH Price To Pay For Waiting
One of the biggest fears many of my clients have is buying a home that’s overvalued or will decrease in price. Fortunately and unfortunately, that won’t happen for many reasons: low inventory, increased population growth and younger, larger generations entering the housing market, etc. In fact, the U.S. would need over 5 million homes just to meet today’s demand. In 2019, the number was nearly 4 million homes.
As a result, Zillow predicts Denver will see a 17.5 percent increase in home values by year-end 2022. More conservative outlooks state Denver will gain 6 percent appreciation, which means a house that’s worth $500,000 today, may be worth anywhere from $530K to $587.5K by December 2022. Couple that with rate hikes, and you’ll likely be spending way more the longer you wait.
Buying Sooner Could Help Build Stronger Equity Gains
While Zillow is anticipating another 17.5% increase in Denver home values, other economists and data scientists are also predicting strong home price increases nationwide. Goldman Sachs predicts home prices will rise another 16%, whereas economists from Realtor.com have more conservative estimates at 6.6%. Point being, you could increase your home’s equity quickly and without having to lift a finger. That puts you in a better financial position should you decide to sell.
Denver Real Estate Could Be the Best Hedge Against Inflation
You’ve probably heard that inflation or the price of goods and services increased by a record 6.2 percent this past year. Denver home prices, on the other hand, increased a whopping 22 percent. But what does that mean longer term, not just the pandemic-induced homebuying, supply-chain-broken craze we’ve experienced?
Two things: 1) historically, inflation usually outpaces individual wage growth and has for a very long time, meaning the money you earn year-over-year doesn’t keep pace with the cost of goods. And 2) property values, especially in Denver, tend to stay on an upward trend, outpacing inflation. Simply put, real estate is among the best investing tools to safeguard your money, even in economic downturns. During the financial collapse in 2007-2009, Denver home values still appreciated, and the Denver market was among the quickest to rebound.
