REAL ESTATE NEWS
What is Fueling the Current Hot Sellers Market . . . and Why Buyers are Still Buying?
[October 2020 | By Ninah Hunter, Real Estate Editor]
If you’ve been paying any attention to current real estate news, you must know it is a strong seller’s market right now, especially in more populous metropolitan areas, such as New York, Los Angeles, and Denver. We are, definitely, experiencing it here on the Colorado Western Slope, as well. So, what is fueling this hot seller’s market?
The ongoing Coronavirus pandemic has definitely impacted people’s lives and the real estate market. People are fleeing the more highly populated areas that have experienced the highest rates of infection and death. The benefits of living in a city, like plentiful and near-by restaurants, pubs, music, theater, and other cultural and professional sporting events, no longer exist due to all the shut-downs. The risk of getting sick now outweighs those eliminated benefits.
People leaving the cities seek smaller, healthier, towns that offer other aspects of quality of life, like beautiful scenery, nature, clean air, clear skies, and opportunities for outdoor activities, like hiking, biking, boating, fishing, hunting, and bird and wildlife watching, all of which can be done alone or in small groups and at no cost. Fortunately or unfortunately—depending on how you look at it—the small towns of the Western Slope offer many of those benefits.
Historically, most people have lived in the same town where they worked. Now they live even closer to work, at home! Workers are realizing they can, in fact, conduct business remotely and productively from home, eliminating the daily commute to an office. Children are also at home attending school remotely. School proximity may, thus, become less a reason to stay in the neighborhood. [See related articles.]
Working or attending classes remotely in smaller towns and communities previously was not possible due to the lack of fast reliable internet and telecommunications systems. Even before the pandemic, this was a must-have for more and more of my prospective buyers.
Rural areas are currently experiencing rapid develop and expansion of fiber-optics. The Ridgway area is a good example of this expansion as clearnetworx moves quickly on its construction of fiber zones from Delta and Montrose to Ouray, and Ridgway to Norwood and Telluride. This will, undoubtedly, attract more remote workers from pandemic-distressed metropolitan areas.
Housing Inventory Shortage
Supply and demand is also at work in Western Slope communities, especially in mountain towns like Ridgway, Ouray, and Telluride. There has been little new home construction in these areas due to lack of affordable land for developers, construction financing constraints, and higher construction costs. New housing development, in general, was forestalled nationwide during the recession and really never picked up at pre-recession pace on the Western Slope.
This combo of inventory shortage plus higher demand from metro-fleeing buyers has caused the rather significant rise in home prices. Sellers are expecting and getting offers at asking price, or more. It is not uncommon for a desirable, competitively-priced home to elicit multiple, simultaneous offers.
Lot prices have also experienced a spike in price since buyers are opting to build when they cannot find an affordable resale home to suit their needs. As a result, there is now a residential lot shortage, creating further demand on resale homes.
Low Mortgage Interest Rates
Despite the challenge of inventory shortages and rising sale prices, buyers are still buying because of the truly historically low mortgage interest rates. The national average interest rate on a 30-year fixed loan is hovering around 3%, and it’s below 3% on a 15-year fixed rate loan. Lower interest rates mean greater buying power. Thus, even though sale prices have gone up, buyers can borrow more to pay for a more expensive home.
Best Practices – Both Sides of Bargaining Table
For Sellers. This is a great time to sell your home. However, not all homes here in Ridgway or other communities of the Western Slope are flying off the rack with buyers lining up to make multiple offers.
When prospective buyers come to check out this area, they don’t always end up buying for various reasons, such as snow, minimal big city amenities, lack of or lower-paying jobs, distance from a major airport hub, or even higher home prices compared to other areas. We are, after all, in competition with other parts of Colorado and western states.
Consequently, sellers still need to price their homes realistically. If a home is over-priced, even in a seller’s market, it may sit on the market for months or never sell. Get with a reputable local listing agent to help you with pricing and a sales strategy.
For Buyers. Despite the current seller’s market, good purchase opportunities do still exist. However, buyers can no longer expect to pick up a bargain. They need to be prepared to move fast, offer close to, at, or even above asking price. Other favorable terms, such as an all-cash payment, a quick close, and fewer conditions, will strengthen an offer.
If paying cash is not an option, it is crucial for buyers to meet with a local lender to get pre-qualified for a loan. If a buyer is not qualified, or not qualified for the best rates, they’ll need time to remedy derogatory information in their credit history or boost their credit score. Most sellers will require a strong pre-qualification letter from a reputable, local lender. So, these steps should be taken before a buyer makes an offer, and even before looking at homes.
In short, it is possible to buy a home in this seller’s market. It may just take more time, patience, preparedness, realistic expectations, creativity, and a good, knowledgeable, pro-active real estate professional to help you make it happen.