Danielle and Stephan Storinsky “saw the writing on the wall.” It foretold how the housing market might change. So, earlier this year, the married couple sold their Arvada townhome.
They timed it just right. They capitalized before concerns about inflation took center stage. They sold their home when the metro area was gripped by historically high housing prices.
They bought their townhome about five years ago for $285,000. They sold for $521,000.
“That part’s pretty nice because now we have a decent amount of money to put down on something,” Stephan Storinsky said.
But now, on the other side of cashing in, they find themselves playing a waiting game. Even with the tidy profit they hauled in, they are struggling to find a home at a good value.
Houses on the market today “are just not worth the price that people are asking,” said Stephan Storinsky.
The couple are living with parents, constantly keeping their eyes open for a good deal.
The couple isn’t alone. While the number of available metro area houses shot upward in a year, so has the number of days those homes are sitting on the market until they sell, according to the latest report by the Colorado Association of Realtors.
One sign of the cooling real estate market are For Sale signs outside homes, an indication realtors are no longer overwhelmed by prospective clients.
The shift comes as mortgage rates — the amount of interest people pay on their home loans — ticked steadily upwards in recent months, making housing that’s been rising in price for the better part of a decade even costlier. The only light at the end of the tunnel lately could be a slight drop in interest rates. But a drop in home prices might not be in the cards, one metro-area realtor says.
“I think it’ll be a small increase throughout the first half of the year and then potentially a small decrease the last half of the year,” said Andrew Abrams, a real-estate broker in Denver who has rental properties in Jefferson County.
But, overall, home prices are expected to keep going up, Abrams said.
As it is, the market is stagnating. Not only are there buyers like the Storinskys playing a waiting game, but many prospective sellers don’t want to leave behind the cheaper mortgage payments they clinched before, likely on mortgage loans with lower interest rates.
“Sellers are hesitant to sell at a lower price than their neighbors from last spring and leave their low interest rate behind, and buyers are afraid what the future will bring in terms of interest rates and home prices,” opined Kelly Moye, a Realtor in the Boulder and Broomfield area, in a statement.
A short break in price hikes
A deeper dive into the data shows that the median, or typical, price of a Denver area single-family home has seen a seven-month decline.
The price sat at $587,500 in November — still eye-catchingly high, but just a 1.3% increase from a year earlier, according to the Realtor association’s December report.
By contrast, in December 2021, the change in median home price was up a whopping 18.3% from a year earlier.
Something to keep in mind is that fall months typically see a slowdown in price growth and home sales each year. But the degree of the slowdown since March “has been more dramatic than normal seasonality, and I think that is dictated by interest rates,” Abrams said.
It’s a calculation that means big changes for families looking to buy homes. Take, for example, a $600,000 home with a 20% down payment.
If the mortgage interest rate sits at 6.5%, the family’s monthly mortgage payment would be about $3,700, Abrams said. On the other hand, at the 3.5% rate locked in by buyers in years past, the mortgage monthly payment would be $2,800.
Feeling priced out
And so the Storinskys’ strategy to cash out while the market was at a high has come with a down side.
They were “originally looking at around $650,000, but interest rates the way they are, we’re probably down into the max $600,000. But probably, more realistically, $550,000 to $575,000 is where we’ll end up,” Stephan Storinsky said.
The Storinskys are scouring the north and west metro area for a home – Lakewood, Arvada, Wheat Ridge and part of Westminster.
Danielle Storinsky, 31, a legal assistant, and Stephan Storinsky, 35, a utilities technician, said they’ve been more fortunate than many people in the market.
But the homes he and his wife have seen don’t seem worth it. The listed pictures of a place may “look great,” but in person leave something to be desired, he said.
“I’ve lived here my whole life, and I’ve seen what houses have sold for,” Stephan Storinsky said. “So for me, it’s just not worth it.”
“It’s hard to compete with people from out of state who come from California” and bring large sums of cash, he added. “Seems like you’re pricing the locals out of market.”
The Colorado Association of Realtors defines the seven-county Denver metro area as Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson counties. The association’s latest report is based on November data.
Long-term price drop unlikely, Realtor says
Abrams takes issue with predictions that raise the specter of a housing market crash.
“I disagree pretty strongly, and I think the practices that were done before the Great Recession are dramatically different than the market today,” Abrams said, adding that “the lending practices back then were just not nearly as strong.”
Before the Great Recession, banks were giving loans to people they knew couldn’t keep up with them, Abrams said.
Another difference: Fewer houses are on the market today, Abrams said.
In metro Denver, there were about 7,300 homes on the market as of Nov. 1, but in 2006, there were about 3 1/2 times more homes available, Abrams said.
Though it’s tough to predict the market amid concerns over inflation and interest rates, the metro Denver housing market could behave in a more stabilized way in 2023.