Is The Colorado Real Estate Market Headed for Negative Home Equity?

by | Jun 4, 2021 | Areas | 0 comments

​Colorado is an outdoor enthusiast’s dream. Learn about the Colorado real estate market in this monthly report from Realtor® Sam Wilson from the Sam Wilson Home Selling Team based on statistics from the Denver Metro Association of Realtors Market Trends Report that you can read in its entirety.

Colorado realtor Sam Wilson

Colorado Realtor Sam Wilson

What’s Happening in the Denver Colorado Real Estate Market?

This Denver Colorado, housing market outlook offers insights and predictions about the metro area’s real estate market, including Arvada, Golden, and Lakewood, Colorado. This housing market update is for the Denver metro area consisting of eleven counties unless otherwise specified. A full copy of the market report is included each month in this update. Refer to the link above.


Residential Closed Homes

The number of home sales closed during the month of May 2021 was 5,322, slightly down from April by -3.8% and up from May 2020 by +48.7%. Of this total, Arvada saw 211 single-family homes closed, with Golden at 151 and Lakewood at 78.

Home showings continued to be strong for the Colorado real estate market. Denver saw an average of 25 showings per listing for the third consecutive month.

The average days that a home is on the market in the MLS continues to decrease. In May, detached home average days on the market was eight while attached homes (condos and townhomes) was 17. These numbers are about half of what they were in January of 2021, with attached homes at 35 days and detached houses at 22 days.

Median Closed Prices

Real estate prices for residential homes continue to rise with a median closed price of $540,000—higher than the prior month’s median closed price of $526,000 by 2.86%.  Depending on how you look at these statistics, home sellers who waited to put their homes on the market likely sold at higher prices. Homebuyers who hesitated paid more.

Home Buyers are Still Competing for New Listings in the Colorado Real Estate Market

Competition remains high for homes in all price ranges. New listings in May decreased slightly for detached homes 4,545 versus April at 4,662. New listings for attached residences were lower in May 2021 at 1,766 versus 2,038 in April.

Home Appreciation Values Are Narrowing Availability in the Classic Market of Homes Priced $300,000 to $499,000

What might be considered a starter home in the classic price range is transitioning into the premier market of homes priced from $500 to $749,000? Due to the cost of building materials and labor, the classic market relative to new home construction may be a thing of the past.

Colorado homes for sale

Is the Colorado Real Estate Market Headed for Negative Home Equity?

Let’s define home equity to understand the potential of what might happen if real estate prices continue to rise. Home equity is the value of a home based on current market value less loans, liens, and other payments due—in a sense, the value of a home that is free and clear of any type of payment due.

Negative equity occurs when homes are purchased with a mortgage and real estate values fall. For example, if the loan value of a home is $500,000 and the home’s value falls to $450,000. The house is in a negative equity position because the home’s value is $50,000 less than the market value. If you have heard the term “underwater” related to a home, this means negative equity.

If you are or become a homeowner in this situation and hold onto your home during a market value dip, you can continue to pay your mortgage and wait for home values to increase before selling in the future. Consumer worry continues to exist about a housing bubble that will result in upside-down homeowners. Is this likely to happen? No one has an accurate crystal ball.

How Experienced Realtors Help Home Sellers and Home Buyers Avoid Negative Equity Positions

If you are a home buyer worried about buying too much house in the Colorado real estate market, experience realtors on the Sam Wilson Home Selling Team can provide market statistics and information about the local market to help you make a wise decision. In some cases, homebuyers limit their searches to $50,000 to $100,000 below budget to accommodate for competition and bidding wars.

Additionally, suppose you are in a loan forbearance situation and wish to be proactive. In that case, Realtor Sam Wilson has extensive experience with Colorado short sales and Colorado foreclosures and can discuss aspects of selling your home.

Loan Forbearance During COVID

Real estate newsA complicating factor for the current housing industry is the number of homeowners in forbearance. Below are links to two articles that may shed insight on how loan forbearance may lead to a future uptick in short sales or foreclosures. The last boom of short sales and foreclosures was during 2007 – 2008.

1 – The first, a report from DS News that touts itself as the leading source of breaking news and up-to-date information for housing and mortgage professionals. In the article Uptick Reported in Forbearance Re-Entries, 2.1 million homeowners are currently in forbearance plans, pausing or reducing mortgage payments for a limited amount of time. Mortgage forbearance allowed these households to use cash for groceries, utilities, and other expenses.

If you are a homeowner in this situation, it is crucial to be in proactive discussions with your mortgage company. By understanding the amount you will owe when forbearance ends, you can plan to manage your monthly budget in light of additional monies that may be needed.

2 – The second report from Atom Data Solutions, called US Foreclosure Activity Continues to Increase Despite Government Moratorium, highlights the increase in foreclosure activity on vacant and abandoned properties. The question remains: will the government extend mortgage forbearance under the CARES Act beyond June 30, 2021.

If not, what will the effect be on the Colorado housing market and housing markets throughout the United States? The potential for foreclosure homes may begin to affect property values in neighborhoods where many foreclosed homes exist. However, this possibility is also unknown. Continued monitoring of the market situation is here in this real estate blog each month.

Planning for The Future of the Colorado Real Estate Market

If you are considering selling or buying a home in the Colorado real estate market today or in the future, establishing a relationship with a knowledgeable realtor is similar to having relationships with other trusted advisors like a CPA or financial planner. Sam Wilson’s experience of more than twenty years in the local real estate market is beneficial for future planning. Call today for a free, no-obligation real estate consultation.

If You Are Thinking of Buying or Selling Contact us Today

Get expert real estate advice when house hunting for homes for sale in Lakewood, CO, Jefferson County, and the Denver metro area. Work with the Sam Wilson Home Selling Team. If you are thinking of buying or selling a home, we make you a priority and share our expertise to make the home buying or selling process as stress-free as possible. Read what our customers have to say about us. 

The Sam Wilson Home Selling Team specializes in homes in the Denver metro area, including Lakewood CO, and Jefferson County Colorado, including Arvada, Aspen Park, Conifer, Edgewater, Evergreen, Genesee, Golden, Idledale, Indian Hills, Ken Caryl, Kittredge, Lakeside, Lakewood, Littleton, Morrison, Mountain View, West Pleasant View, and Wheat Ridge.

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© 2021 Sam Wilson All Rights Reserved. Articles by Pamela D Wilson


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