Housing Market Trifecta

Housing Market Trifecta For Trade-Up Buyers

Housing Market Trifecta Creates Excellent Trade-Up Opportunity

Although price appreciation has slowed slightly, the Denver-metro housing market, overall, remains strongly skewed toward sellers due to tight inventory and high buyer demand. The average days on market (DOM) is about 29 days, which is substantially lower than the 30+ year average of 70 DOM. Despite our continued seller’s market, buyers looking to trade up their smaller home for a larger home have found themselves with an excellent opportunity. Typical Scenario for Trade-Up Buyer Trade-up buyers normally don’t have any special advantage. In a hot seller’s market, buyers can quickly sell their existing home at top dollar, but they also face buying the replacement home at top dollar with little negotiation power. The same holds true in a buyer’s market. The trade up buyers in the buyer’s market can’t sell for top dollar, but they will have the benefit of buying at a better price and with more negotiation power. In other words, when you’re a trade up buyer the dynamics of seller vs buyer market don’t matter much. You’re selling high and buying high or selling low and buying low. It’s a wash.

Current Scenario for Trade-Up Buyer

Sell Your Smaller Home Fast

The unique dynamics of our current real estate market presents some fantastic opportunities for the trade-up buyer. In our current market, sellers of smaller sized homes are continuing to enjoy a strong seller’s market, with months of inventory (MOI) at about 1.3 months. This allows them to sell their homes fast, at top dollar, and with lots of negotiation power.

Negotiate for Your Larger Home

As you can see in the chart below, the story is much different with larger homes. Notice that the MOI in the largest homes has crept up to over 4 months. With less demand for those larger homes they are taking longer to sell and the buyers of those homes are gaining more negotiation power. While 4.2 MOI is not necessarily a strong buyer’s market (that’s more like 6+ MOI), the MOI for larger homes in our chart does not reflect the supply of homes in the new build market. The actual inventory of larger homes is much higher than reported in the MLS because of new construction homes that are not listed on the MLS. The MOI for larger homes is probably a lot higher than 4.2. Our current market presents trade up buyers with a lot more opportunity to sell high and buy low.

3Q19 Resi Trends

Interest Rates are LOW: You've got buying power!

When you’re trading up the ability to sell high and buy low are two excellent factors. Completing the trifecta for trade up buyers is interest rates. Interest rates today at about 1% less than they were a year ago. They haven’t been this low since 2016. This 1% difference in interest rates translates to a lot of buying power. With a $600,000 loan that 1% can save you $350 per month!

30 year fixed interest rate chart


Article is courtesy of First Alliance Title and their research. Republished with permission.