When we entered this market we were told it’s a “sellers market.” It’s no secret that Denver’s market is hot, meaning there are a lot of people trying to buy but few looking to sell. Supply is far lower than demand. If you remember from your last macroeconomics class, that means prices go up.
Denver’s market has been like this for a while. According to the Denver Post, home prices gained 12% per year between 2013 and 2015. A home that cost $100k in 2012 would go for $336k this year. That’s insane (to me). We’ve met a few people who bought homes during that time and their stories are wild. Homes that are “fixer-uppers” would go for $30k over list price. Just as you put in an offer on a home you can both afford and live in, someone swoops in with a cash offer $40k above yours — and yours was already several thousand over offer.
Our realtor has told us we’re still in a seller’s market, especially with our budget. In a balanced market, sellers and buyers can not only negotiate price, but also things like who pays for closing costs. It was pretty common, five years ago, for the seller to pay the buyer’s closing costs. That’s less common today because sellers can pretty confidently assume they’ll find a less demanding buyer — or simply find a buyer who won’t have closing costs because they’re paying cash.
Being in a seller’s market is maddening. The list prices are unreliable because you never know when someone is going to come out of nowhere to buy the house from under you. You assume that if they say they’re taking the appliances, they mean it. As first time homebuyers, you know your offer is the least attractive if you can’t offer more than the bare minimum 3% down — even though the seller gets paid the same — someone with 10%, 20% or 40% down is considered “stronger” than you (and they’re probably getting a better deal on closing costs, those jerks).
Houses cost a lot of money, especially if you know you’re going to pump another $10-20k into just fixing things. We offered on our first house this weekend, and went about $25k under list price. In the listing, the seller said they were taking the water heater, washer and dryer, and microwave with them. The house currently has a lean-to porch attached with a sliding glass door that doesn’t lock, and the door into the house itself locks but has an open pet door attached. The microwave, whatever, but the back door will be on our short- to medium-term plan for repair.
We knew our offer wouldn’t get accepted but we didn’t think the counter offer would be simply list price. Such is a seller’s market. The owner of the home now knows that we’re interested and maybe taking that as a sign that he figured out the market equilibrium for his house or got close enough that all he has to do is wait a day or two and another offer will come in that beats ours. And that’s all despite the fact that home sales have started to slow down, a sign the market is cooling down.
If this doesn’t work out, maybe we’ll wait and see what 2017 holds.