The Denver Real Estate Market in February 2022
The Federal Reserve is enacting its plan to curb rising inflation by pushing interest rates higher throughout 2022. Accordingly, the 30-year fixed rate fluctuated around the 4% mark (national average) in February which is almost a full percentage point higher than a year ago.
Because of its effect on buying power and affordability, mortgage applications dropped to their lowest level since December 2019. If you're still in the game, there is potential for slightly less competition.
Still, the inventory problem remains. Looking at the data, there were 4,193 new listings (detached and attached homes) in February compared to 3,479 in January. By the end of the month, 4,161 listings were pending and 3,202 closed—2,141 detached and 1,061 attached. Houses are going like hotcakes.
Accordingly, days on market dropped from 20 in January to 15 last month. And on average, homes sold for 104.8% of their list price. Our own PorchLight agents are even seeing some properties sell for six figures over the asking price.
Looking closer, detached single-family homes reached an average price of $739,950. A year ago, it was $635,261. That's also well over the peak average of $725,278 which we hit last June.
Attached home prices averaged $461,778 in February compared to $399,700 the prior year. Also up 2.7% over January prices.
Despite the price increases, there were just 1,226 active listings by the end of the month—853 detached homes and 373 attached properties. While up 3.6% compared to the prior month, that's down 39.4% year-over-year and a record low. The historical average is 13,220 active listings.
We’re keeping an eye on the ongoing conflict in Ukraine. While interest and mortgage rates have been trending upward, global uncertainty often results in downward pressure on mortgage rates. Thus we saw mortgage rates dip to 3.953% on March 7th, over two weeks into the Russian invasion.
What's next for mortgage rates is unknown though a continued lack of inventory remains a market constant. Your best bet is to work with a PorchLight agent who can advise you on when to make your move, how to bid strategically, and connect you with the best lenders in the business.
To view our report on Denver real estate market stats for February, click here.
How to Apply for a Mortgage
If you are planning to buy in 2022, one area where you'll have more control is ensuring that your funds can be verified and loan approved once you've found a home and submitted a successful offer.
While it can be a stressful experience, there are simple steps you can take to improve your odds. Follow these pointers to help you avoid common pitfalls and ensure a more seamless closing.
1. Check and Repair Your Own Credit
Bottom line, the better your credit score the better your mortgage options will be. Pull your free annual report from Equifax, Experian and TransUnion. You can also use a free app like Credit Karma. Follow-up on and fix anything suspicious or inconsistent. See what debts you can pay off quickly, then make a plan to keep revolving credit balances low and reduce overall debt. It may also be smart to tuck away those credit cards and create a workable budget.
2. Lower Your Debt-to-Income Ratio
Lenders pay close attention to your debt-to-income ratio (DTI) —monthly debt obligations divided by gross income. This includes credit card, student/personal loan or child support payments, but not things like entertainment or groceries. Typically, lenders want a mortgage and home costs to be no more than 28% of your gross income. Once everything is calculated, your DTI should be no more than 36%. Fewer debt payments give you greater buying power.
3. Get Pre-Approved by Your Lender
Pre-qualification only requires you to provide information about your finances and credit score. In return, you’ll get a general estimate of how much you can likely borrow. Pre-approval is more in-depth. A lender will look further at your finances and require documentation regarding your credit, income and debts. For your efforts, you’ll know exactly how much your loan amount will be—even get it in writing. You can then search for homes in the appropriate price range.
4. Look Beyond the Home’s Price Tag
Keep in mind that the price of a home doesn’t exactly reflect its true cost. If you’re putting less than 20% down, you’ll likely be required to pay for Private Mortgage Insurance (PMI). Property taxes and homeowners insurance may also be rolled into your monthly mortgage payment. And don’t forget HOA dues or condo fees, plus closing costs that buyers are responsible for such as earnest money, an appraisal and the home inspection. This is a significant purchase.
5. House Hunt with a Real Estate Agent
While your house hunt might begin online, a real estate agent is an invaluable resource when it comes to choosing the right home and neighborhood for your needs and lifestyle. They can also introduce you to areas where your pre-approved dollars will go further and neighborhoods that have huge appreciation potential. Plus, an agent will often know if a community or condo is due for a review of its reserve fund which can lead to higher HOA fees.
6. Gather Your Financial Documentation
Closing on a home loan can be overwhelming. From providing two years of W-2s or 1099s to putting personal information on the table—like proof of child support payments—no rock is left unturned by your lender’s underwriter. So, gather all documentation as early as possible. Have records of your bank accounts, income tax returns, car loans, credit cards, any other debts, plus assets such as investments, other properties and your 401k.
7. Don’t Make Changes to Your Job or Finances
Even after you’ve progressed from approved to “clear to close,” a lender will continue to track your finances and credit score until the day of closing. Keep paying your current mortgage or rent, as well as your bills and credit cards. Don’t close accounts, change jobs or switch to a new bank. And while it may be tempting, hold off on major purchases for your new home, like furniture or appliances. The goal is to maintain the status quo until all paperwork is signed.
