This was the top story in the business section of Sunday’s Denver Post. I will highlight a few facts and quotes from the story.
- According to DMAR stats, our home inventory levels in September were the highest we have seen since the fall of 2013.
- One the hardest tasks for agents today is convincing sellers that the market has shifted some in the buyer’s direction. Thus, they may need to lower their price and accept normal buyer contingencies like inspections, appraisals, and sales of current homes.
- If buyers are going to pay TOP DOLLAR for your home it better be in TOP condition. Thus, I would recommend that as a listing agent you take your sellers out to view their competition and price accordingly OR spend money to bring their home up to TOP condition.
- The article on page 4 claims that “home prices adjusted higher when rates dropped. But, so far they haven’t moved the other way to adjust for the rise in mortgage rates.”
- This statement is INCREDIBLY UNTRUE! Home prices and interest rates don’t move together in either direction. By this “logic” when mortgage rates dropped by over ½% to roughly 3.50% in June 2016 after the Brexit vote, home prices should have risen beginning in July. I looked back at DMAR data from July 2016. Average sold prices dropped 1.9% in July from June and median prices dropped 3% in July from June. Average and median prices dropped in August too.
- A study from Attom Data Solutions was cited too on both Denver and Adams County median priced homes. In Denver County the median priced home in the 3rd quarter was $430k and “with a 3% down payment and conventional financing ratios, a buyer would need an income of $117,148 to qualify.” Whereas, the average yearly wage in Denver is $68,419.
- For their “conventional financing ratios” they used 28% of the gross monthly income needed to qualify for the loan. We as lenders don’t use the 28% ratio to qualify borrowers and haven’t for many many years. Instead we use the total debt to income ratio of 45% for borrowers with Fico’s < 700 and now 50% for borrowers with Ficos > 700.
- To qualify with the 45% ratios a borrower needs to make $75k year to QUALIFY. Now it may take income of $117k to comfortably AFFORD the home, but not to QUALIFY for the home. Words MATTER. Also, for decades, first-time home buyers and even some move up buyers have struggled with their new house payments for a few months. I remember hearing stories from 20 years ago from people who bought homes in the 70’s and their monthly payment was $200 and they didn’t know how they could afford that payment; but they did. I remember Tamara and I bought our first home in 2000 and our total payment was $1300 a month and we had been paying rent of just $350. That is true payment shock; but we made it just fine.
In essence our market is moving towards a balanced or normal market, which is great news for buyers and sellers! Buyers need to know homeownership is within reach now. Sellers can take solace in knowing that with more inventory they don’t have to be as scared about not finding a new home.
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