Denver's housing market is ‘four-alarm fire’ hot, realtor says

Kathy Casey, Coldwell Banker Residential Brokerage Realtor and Broker Associate, sits down with Yahoo Finance Live to break down the inflated prices in the Denver housing market, the competition between homebuyers, and mortgage rates.

Video Transcript

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- The high altitude is not the only thing that will take your breath away in Denver these days. The housing market might leave you needing an oxygen tank. Outside California, only two cities in the country-- Boston and Seattle-- are more expensive on average according to Anytime Estimate. $700,000 the average price.

Kathy Casey is a realtor and broker associate with Coldwell Banker in Denver. She joins us. Nice to see you, Kathy. Denver is my home, but the last time I lived there, $300,000 would buy you a fantastic house in a gorgeous neighborhood and a big yard. That is not the case any longer, is it? Up 200%, prices are, since 2000. What are you seeing in the market, and what will $300,000 buy you today?

KATHY CASEY: Oh, my God, Dave. $300,000-- man. You'd be hard pressed to find anything for $300,000 these days. Even a condo, even in a decent neighborhood, you'd be hard pressed to find. Our market is just so red hot. I mean, it's not just red, it is a four alarm fire. We are actually really on fire. It is just so hot right now. And being a Colorado native-- and as you said, you've lived here before-- it is really kind of heartbreaking to see how expensive things are in the old neighborhoods and how quickly that has gone up.

We've seen double digit returns here for the past several years. So I think last year was 20% equity, is what it was just one year. And imagine that's been year over year over year, so it's almost compound equity almost acting like compound interest. So that's what we're seeing. But for $300,000, you would have to pretty much be out of the city, in some places like Greeley or Pueblo or Deer Trail. Unless you're looking for even, like I said-- you might be able to find a one or two bedroom condo in that price range.

- Yeah, folks. Google a $300,000 home in Denver. You'll be shocked what you would find there. Most of the hot housing markets have seen massive population growth, like Phoenix and Tampa. But I was shocked to see that Colorado population growth was the slowest last year since 1989. So what is driving these prices so high?

KATHY CASEY: Yeah, that's an awesome question. So what's happening-- there's two things that are happening. So some people that want to upgrade on their home that aren't able to, what's happened is they are cashing out of their homes. So they're taking advantage of their homes being able to sell at a high rate, and they're cashing out and they're moving to other places. But at the same time, we are still having an influx of people.

And the influx of people that are coming here are generally coming from the coastal areas. One thing that COVID brought is you can pretty much work wherever you want, work from home. So a lot of those areas were still very expensive, so we're still kind of reasonable to some of them.

- Primarily, where is the demand? Is that on the high, luxury end or more on the lower, single-family starter home?

KATHY CASEY: It's more in the single-family starter homes. It's more of people really just trying to get in on this very hot market, and just home ownership being, as you know, paramount for just being the cornerstone for building wealth. And so it really is just some people just trying to get in. But we also have, in our million dollar market-- million dollar, million and two, million and five-- it's still hot as well. We will find competing offers in both those markets. But obviously, the lower we go, the more competition that it is.

- What do buyers need to do to get their offer accepted? We've seen some extreme stories across the country. Read about someone paying $300,000 in a suburban Denver-- it was $300,000 above list. What are you seeing there?

KATHY CASEY: Yeah, it's really not uncommon to see $100,000 over asking price in our market. You really have to kind of be creative if you're looking in the market these days. I mean, I've seen so many things as a listing agent. And on the other side, I've seen people offer season tickets, get pizza for a year, moving supplies, puppies. I mean, it's just crazy. So anything goes in our market. So really just being creative. But more than anything, you want to put together a really good, solid offer. And what that means these days is doing everything that you can to make it easier for the seller.

The sellers really just want to know, number one, can I get as much money as-- they want to get as much money as they can. And they want to know if you're able to get it done and if you're going to be able to live up to your word and not back out. So basically, like I said, being creative, doing things for the seller, such as maybe allowing them to stay in the house a little bit after you've closed on the house so that they can have time to move out and find another place to live. So if a seller is looking, for example, to purchase another property, they're going to be facing the same issues as those buyers.

- Yeah.

KATHY CASEY: So they don't want a contingent offer. But they're going to have to sell first before they start looking. So giving the seller a couple of months--

- Sure.

KATHY CASEY: --to stay in the home after you close on the home, really we find has helped a lot. Also, we have a lot of cash offers in this market. So--

- Kathy, I just want to-- sorry to cut you off. I just want to ask you real quickly before we have to go, what has been the impact of rising mortgage rates over 30% now on-- over 5% on a 30 year?

KATHY CASEY: I'm sorry, I missed the question.

- The impact of rising mortgage rates on the Denver market.

KATHY CASEY: [? Looking ?] [? at ?] the rates, so, yeah, that's a very good question. You're going to need to really circle back with your lender. Make sure that you are still qualified at what you thought you were a couple of months ago. A couple of months ago when interest rates were at 4%, now they're at 5.5%. You're probably paying a $500,000 loan a couple of hundred dollars more, so you want to make sure that you circle back with your lender and make sure you still qualify for that amount.

Also, discount points are kind of coming into play a little bit more than they used to. You may want to consider buying down that rate if you plan on staying at that house long-term. Short-term, the math might not work for you, but long-term it probably will.