Real estate sales have slowed dramatically
Some sellers are finding they are not able to sell because of a lack of buyer demand
Some sellers are deciding to rent their homes, rather than sell
Numerous homeowners in Colorado have attempted to sell their houses for weeks to months, but continue to face the ongoing issues of not getting their needed sale price. Some would-be sellers are deciding they will not sell at all, deciding instead to rent their homes. These reluctant landlords are often referred to as ‘accidental landlords’, because they did not intend to be real estate landlords.
There are reasons for this dramatic shift:
Home prices went too high, too fast-
This has been an ongoing trend for the last decade. With home values increasing annually by up to 20% this has made home prices out of reach for many would-be first-time buyers.
There was a frenzy of buyers in part because the federal government provided extremely low-interest rates and a 30-year fixed loan could be locked for under 3% interest. This resulted in record demand for homes and bidding wars were not uncommon in the Denver market. This resulted in sellers and buyers waving property inspections and paying amounts well over the appraised value of property appraisals - these are signs of an overheated and unhealthy real estate market.
Buyers are taking a breath-
Interest rates have more than doubled in the past few months (currently over 7%) and buyers are coming to terms with this increased cost of borrowing. A recent survey has shown that 75% of buyers in the last year have some regret about their home purchase. Many recent buyers now regret the price they paid, some settled for a property they really did not want, a less than desirable location, and some overlooked the negative aspects of the home simply because they feared they would miss out.
Recent buyers are stuck-
Over the past 10 years, sellers could sell just about any property - for just about any price. But for many individuals who purchased a home during the past 9 months - and often overpaid - they find themselves now unable to sell for more than the purchase price. This does not matter to those individuals who do not need to sell, but when an unplanned life event causes a person to have to move - they are now stuck with a home that is worth less than they paid - and very few potential buyers are interested in buying. Some of those individuals are now considering renting out their homes.
Should you rent your home?
There are many risks and factors to consider before you rent your home. You must price your property appropriately, advertise the property, perform detailed and legal applicant screening, ensure you have a proper lease agreement, collect rent each month, make repairs, and follow all state and federal laws governing rental housing.
If you are considering renting your home - we have two resources below that will help you make that decision.
Grace Property Management & Real Estate
Serving real estate investors & residents since 1978