We spoke to buyers, sellers, and real estate experts about how the pandemic set fire to an already-smoldering market.
• 5280 May 2021
Feeding frenzy. Dogfight. Gold rush. Pick your favorite metaphor for the Colorado housing market these days: They all capture the intensity of an era that’s seeing more and more people swarming to buy fewer and fewer available homes, sparking bidding wars and pushing prices to record highs. From the pandemic’s beginning in late winter 2020 up through press time in early April, desperate buyers have been considering raiding their retirement accounts in an attempt to compete with cash offers. Modest homes that would’ve sat on the market for weeks or months in other years have been going under contract within hours of listing. Out-of-staters have been signing contracts before even seeing their new houses in person. And with buyers battling each other, those with property to list have won big.
Colorado has long been a desirable address, and the Denver metro area’s real estate market has been growing for years. But at the outset of 2020, nobody expected the year to be so exceptional. History tells us that elections, particularly contentious ones, typically slow things down as buyers and sellers wait out political and economic uncertainty.
More from our May 2021 Issue
Then the pandemic hit. As the state imposed stay-at-home orders in the spring, new real estate transactions that were not yet under contract abruptly halted while the economy nose-dived. When agents and buyers got the OK to venture into prospective homes again—masks on and clutching hand sanitizer—experts feared business would fizzle. “We really thought that this market would be horrible,” says Kelly Moye, media spokesperson for the Colorado Association of Realtors and a Boulder-area Realtor with Re/Max.
Instead, Colorado’s real estate market took off. Statewide, sold listings rose nine percent, days-on-market dropped by roughly eight percent, and the median home price rose by more than nine percent, to $415,000. Things were even more extreme in the Denver metro region, where the market tallied a record high for annual closings paired with a record low of active listings. That mismatch helped push the average price for a single-family home in the Mile High City to an all-time high of $625,100 in October 2020 (the year-end average ended up at $616,895). And at least so far, there’s no relief in sight: This past February, the median price of a single-family home in Denver County jumped almost 23 percent year over year, and the inventory of available homes plunged by more than 70 percent.
By most accounts, this housing mania happened not in spite of the pandemic, but because of it. The fear and uncertainty of living through a modern-day plague inspired us to re-evaluate what we really wanted, not just in our homes, but also in our lifestyles. For some, that was having a bigger living space. For others, it was moving to the country or the mountains. For plenty of people from outside Colorado’s borders, it was a new home in the Centennial State. For the first time in history, the ubiquity of remote work made those desires suddenly achievable. Bottom-scraping mortgage interest rates didn’t hurt either.
We’re still sorting through all the ways the pandemic has changed what it means to live in Colorado, and whether these trends will stick remains an open question. It’s clear, however, that COVID-19 provided fuel for an already-blazing demand for real estate here—and, for many, turned the straightforward act of buying a new place into a chaotic, frustrating, elbows-out struggle.
Have Laptop, Will Move
Before March 2020, Macy Lao and Kyle Hagan, both 36, loved the New York City life. Lao, director of social media for a television network, and Hagan, a civil engineer, both commuted to Manhattan from their apartment in Brooklyn. They’d talked about buying a home somewhere with better access to the great outdoors, but had no immediate plans to act on it. Then, COVID-19.
While locked down in hard-hit New York City, the couple started asking themselves some big questions. “We’ve been here so long,” Hagan says. “Where do we want to live, and what kind of work do we want to do?” Plus, their 1,175-square-foot pad had been feeling cramped since before the pandemic. “We realized our apartment was a really great space for two people when you don’t end up staying in it for 24 hours,” Lao says. What began as a long working vacation in Denver this past fall—made possible by the fact that both could work from home—turned into, Let’s just see what’s out there. They quickly found a stylish, 3,233-square-foot Sunnyside house with four bedrooms and four and a half baths listed for $1.1 million, about the same value as their Brooklyn apartment.
Hagan and Lao liked the urban energy and walkability of the neighborhood, how much less dense Denver felt than New York City, and its easy access to trails and open space. They closed on the house in October. Hagan was able to transfer to his company’s Lakewood office and is still working remotely for now. Lao’s office was only officially allowing working from home through summer 2021, but she hopes to extend that benefit indefinitely. If she can’t, she’s likely to choose Denver over the job. “This is the first time a quality-of-life variable is guiding my life, not a career one,” she says. “What the last year has shown us is that your life is kind of important.”
Hagan and Lao weren’t the only ones to head for Colorado’s so-called Zoom Towns with remote work suddenly in play. Stymied locals complained about being outbid on houses by out-of-staters flush with cash—their home-buying budgets roughly 26 percent higher than locals’, according to a January 2021 Redfin study—from selling their old homes in even more expensive cities. Data back that up: According to the Denver Metro Association of Realtors’ 2020 year-end review, more people moved into Colorado than moved out, with out-of-staters accounting for just under 20 percent of all moves.
Escaping New York City: Kyle Hagan & Macy Lao wanted more space. The work-from-home revolution allowed the couple to find the square footage—and outdoor access—they craved in Denver. Photo by Matt Nager
We don’t yet know exactly where they all came from, but, anecdotally, real estate agents report an increase in people from California (particularly San Francisco), New York City, Chicago, Texas, and Georgia. Such patterns make sense: “Where $1.3 million in Brooklyn might get you, like, a 500-square-foot apartment, and here $1.3 million gets you a five-bedroom, 4,500-square-foot home in a walkable neighborhood,” says Britt Armstrong, a Realtor with Kentwood Real Estate in Denver, with a laugh, “that’s got to feel like us moving to a chalet in Vail—if that chalet were priced at $350,000.”
Nationwide, a survey from Stanford University found that 42 percent of the American labor force was working from home as of June 2020. Major employers like Twitter, Facebook, and Nationwide Insurance extended work-from-home policies indefinitely. Locally, surveys of member businesses by the Colorado Chamber of Commerce reported that 87 percent of respondents allowed employees to work fully or partially from home last summer, the vast majority with plans to continue. Of course, not everyone benefits equally from these new remote-work perks. The jobs that can be done easily from home tend to be higher-paying, white-collar positions, while many lower-paying gigs (service, retail, health care) must be done in person.
With commuting a nonissue, plenty of Coloradans who could leverage WFH policies did so. Urbanites could more easily move to the suburbs. Many fulfilled their dreams of living life in the mountains. But even that had consequences: Resort towns, like Aspen, Crested Butte, and Vail, have seen some of the most dramatic surges in demand statewide, from both primary and second-home buyers. Telluride’s market was particularly fierce, with sold listings in San Miguel County leaping 122.6 percent over 2019, and the median sales price increasing 66.5 percent, to $932,500, for a single-family home. “People are finding they’re capable of doing business without being physically in the office,” says Steve Patterson, president of the Telluride Association of Realtors. “That realization has led to everyone moving their ‘offices’ here.”
Nicci and Steve Jaccaud, 39 and 41—who sold Lao and Hagan their Sunnyside home—had always considered themselves city people. “We loved the neighborhood,” Nicci says. “We could walk to restaurants, and we weren’t far from central downtown, or from seeing the Rockies or Broncos.” When they bought the place in 2017, they had no reason to believe they wouldn’t be there for many years. “We thought this was more than enough space,” she says, “and that we’d be those people who were trying to decide which DPS school our daughter would go to.”
They began reconsidering when their daughter was born in 2019, but as recently as March 2020, thought they’d stay put for another couple of years. As the virus spread, though, they quickly realized they’d need two home offices for the foreseeable future as well as extra room for their growing baby. “As the pandemic went on, we were like, ‘Why are we waiting?’ ” Steve says. They sold their house early that October, and by the end of the month, had closed on a lot in Littleton on which they’re building a custom home that’s approximately 5,800 square feet.
The Jaccauds were among a large cohort who upsized in 2020, reversing a years-long trend toward more sustainable housing. “People were looking for smaller, more energy-efficient spaces,” Re/Max’s Moye says. “We were seeing a trend toward walkability, urban living, and mixed-use development. All of a sudden, people want a bigger house, two studies, a homework room for the kids. They need space from each other and neighbors.”
Needing the room to work from home or for kids to do remote learning contributed to the shift, as did the fact that so many other places where we once spent “me time,” like gyms and restaurants, were off-limits. “Think about it this way,” says Stephen Billings, faculty director of the master’s real estate program at the University of Colorado Boulder’s Leeds School of Business, “people use a certain amount of square feet of living space, and it can be anywhere—office space, coffeeshops. When you take all of that and put it in your home, it’s the wrong allocation.”
That yearning for space didn’t stop at the front door; houses with expansive yards and unfettered access to nature were also at a premium. Part of that demand likely can be traced to the fact that outdoor recreation was some of the only recreation available. It’s also fair to assume that people were simply lured away from dense, presumably virus-y spaces to places where they felt free to inhale deeply. Shannon Floyd, 33, a systems engineer at a research institute in Boulder, was living in a 343-unit building in Broomfield last year, where “people were wishy-washy about wearing masks, especially in the elevators and corridors,” she says. “You couldn’t really avoid people.” She decided to look for a house to get away from all that shared space.
Learning she’d be able to afford the most house with a new build, Floyd signed a contract on a custom three-bed, two-bath ranch with 1,435 square feet in “farm country,” just north of Berthoud, in October. “It just feels like there’s more space, more breathing room,” she says. That kind of space has proved popular. “Properties in the country are in extreme demand,” says April Neuhaus, managing broker at Neuhaus Real Estate in the northern Front Range area. Again, credit remote work: “People have the freedom to go into the rural areas where they have more flexibility with their lifestyles,” she says. “And there are bigger houses and lots they can afford now that they’re out of the metro.” The same pattern held true in some of the mountain counties, like Gilpin, a high-elevation, rural stretch south of Nederland that saw single-family home sales leap almost 29 percent (sales of townhouses and condos more than doubled). Liz Ford, owner of Ford & Co. Realty in Nederland, attributes the activity to “wanting to be free and closer to nature. It’s been a very stressful year.”
Temporary Problem, Permanent Solution
Even when you don’t have to worry about finding a job, picking up and moving across the state (much less the country) is no small matter. And yet, this year’s real estate trends reflect major life moves, most of them made in the span of just a few months. Which raises uncomfortable questions: What happens when the pandemic ends and life approaches normal again? Will 2020’s homebuyers find themselves marooned in the suburbs or the country, rattling around in oversize houses and wishing they’d stayed near restaurants that don’t have “Corral” or “Factory” in their names?
For now, no one can say with any certainty; however, many brokers explain most of their clients weren’t making real estate decisions in a panic. Instead, the pandemic seemed to nudge some homebuyers to make moves they’d already been thinking about. “They came here to escape during COVID, and they stayed,” Telluride’s Patterson says. “They knew they always wanted to—they just needed a trigger.”
Many of Armstrong’s clients told her they had done some soul-searching during the initial quarantine period in spring 2020. “Our lifestyles have been so outward for so long,” Armstrong says. “Where are you vacationing, where are you going to dinner, what resort are you skiing? When all of a sudden home became our only outlet, we looked at things through a very different lens.” The veteran agent says she was impressed by how quickly people with the luxury to do so changed their entire lifestyles.
Nicci Jaccaud acknowledges that leaving Denver’s urban core is a big step for her, but also says their new, family-friendly neighborhood in Littleton has advantages over Sunnyside’s bustle and traffic. Besides, she says, “Littleton isn’t that far from downtown.” As for Brooklyn transplant Lao: “I really do love New York City and the energy that it offers,” she says, and she does fear she’ll miss it. “But if I do feel that way, it’ll be my future self’s problem to deal with.” Her husband agrees, but is slightly more sanguine. “I’m fairly well done with the city,” Hagan says. “The pandemic hasn’t done anything new. It’s just accelerated what everyone was already going to do.”
Let the Bidding Wars Begin
The desire for Colorado homes in 2020 may have taken everyone by surprise, but its consequences track with simple supply and demand. When the economy shut down in March 2020, most sellers pulled their homes off the market, and the inventory never recovered. Listings were down, in some cases by large margins, across the state. In a chicken-or-egg dilemma, the more intense competition for houses became, the less potential sellers wanted to put their homes on the market, for fear of not being able to find another one. Compounding the problem, says CU’s Billings, was that new construction had been lagging statewide for more than a decade. Take that dwindling supply and add a surge in prospective buyers—particularly mobile, wealthy ones coming from out of state—and you get Olympic-level competition among bidders and ballooning prices. “It took about the highest level of making aggressive offers that I’ve ever seen” to land a house, says Todd Gullette, managing broker at Re/Max of Boulder.
Cynthia Meyer, 31, the Colorado Chamber of Commerce’s communications director, can attest to that. She and her husband, Jaron Hudgins, 38, moved to the Centennial State from Austin, Texas, in 2019, and started looking to buy at the end of that year. They originally hoped for an urban bungalow in Baker, Congress Park, or Highland, but quickly realized they’d have to be more geo-flexible. “Prices went up astronomically” over the 10 months they were shopping, Meyer says, and “we looked at about 50 houses and made six or seven bids. We competed with so many cash offers.”
Trying to Compete: Meagan Gillcrist couldn’t contend with cash offers. Gillcrist found that properties in her general price range were always garnering multiple offers. Photo by Matt Nager
Dispirited, they finally delivered a winning bid on a two-year-old, four-bedroom, four-bathroom home in Lakewood—but it took an extremely seller-friendly offer to do it. The couple initially offered $10,000 over listing price, but their $1,500 escalation clause bumped the total to $30,000 over. They also waived the appraisal contingency, agreed to rent the house back to the sellers for a month for free, and got their lender to sign off on a two-week close. Though they’d originally been looking for a starter home, the ordeal switched the couple to a “forever home” mindset. Says Meyer: “We got so exhausted that in the middle of the process I looked at my husband and said, ‘I don’t want to do this again in five years, do you?’ ”
Steps like these all but eliminate risk to the seller, forcing buyers to gamble with more costs—potentially a lot more. Appraisal gaps became a major concern, says broker Neuhaus. “Bidding wars have been pushing prices up higher than comps,” she says, referring to the other recently sold homes in an area that appraisers use to determine a home’s value. Committing to a price no matter what the appraiser says is a risky move. Say a buyer offers $700,000, but the appraisal deems the house worth only $650,000. Banks would only lend up to $650,000, and buyers would have to come up with $50,000 in cash to cover the difference.
For inspections, buyers also often have had to stipulate that they wouldn’t negotiate over anything but major issues. In a buyers’ market, people can often knock the price down or ask sellers to fix things like an aging roof or outdated carpet. Not so in Colorado right now. Tight inventory also has made rent-back agreements a popular way to sweeten the deal. “A lot of sellers are concerned about being homeless,” Neuhaus says, “so they want to have the ability to rent their houses back after closing to locate a replacement home.” And forget about most contingencies in an offer, Moye explains. “In this market, a home sale contingency is definitely not considered,” she says. Though it’s not impossible to land a house with an inspection or appraisal contingency, those stipulations put buyers at a big disadvantage.
The ubiquity of cash offers flying around last year added to buyers’ headaches. Shoppers who needed a mortgage (that is, most people) found it difficult to compete, even if they had sterling financial cred. That gave rise to startup lender Accept.inc, a Denver-based company that offers cash up-front so buyers can bring a more attractive offer to the table. The company then services the mortgage instead of a traditional bank. Porter Ergon, a Realtor with Keller Williams Realty Urban Elite in Denver, says one of her clients scored a Cory-Merrill house by using Accept.inc. “There were three other offers, and my client matched one that was slightly over asking price and ended up winning,” she says. “The listing agent said, ‘Wow, if this is cash, we’re definitely going for it.’ I think it’s awesome, but once the word gets out, it’s going to make things just as challenging. What are buyers going to have to do to be competitive next?”
When geologist Justin Cardwell, 42, landed a job with Newmont Corporation last spring, he and his wife, Kelly, also 42, had to make a quick move from their home in Oro Valley, Arizona, to the Denver area. That’s a daunting task anytime, but the Cardwells needed housing right as the first pandemic-related lockdowns were slowly easing. Like most people, the Cardwells began their home search online; unlike most, the couple never went analog. Restrictions on travel and home showings were tight that April, and their agent (Kentwood’s Armstrong) advised them they’d have to bid on a home before they’d be allowed inside. They did everything virtually. “We had to make an offer on a house we couldn’t even drive by!” Kelly says. “It was the craziest thing we’d ever done.”
The Cardwells used Kentwood’s digital listings to zero in on a three-bedroom in Castle Rock with a “gigantic” yard. Then Armstrong conducted a FaceTime tour for them, and also cruised around the neighborhood to confirm there were parks nearby for their 10-year-old daughter. Armstrong, who handled three sight-unseen deals last year, says, “I’ve never felt so much pressure to be right as I did in those moments.”
It was only at the inspection, after putting the house under contract for $435,000, that the family saw its home in person (the contract did include a “COVID-19 clause” that would have allowed them to back out without penalty). Luckily, they liked the place, but, “I don’t ever want to have to buy a home online like that again,” Kelly says.
At first, these sorts of virtual buying practices were forced by the state’s COVID-19 restrictions. Transactions all but stopped in mid-March 2020, when real estate agents weren’t initially counted as essential workers. By late March, agents had the go-ahead to return to work, but in-person showings and walk-throughs didn’t ramp up again until mid-April. In the interim, “The world was shut down and we were still getting calls,” Boulder’s Gullette says. “People were prepared to buy even if they couldn’t see the property.”
Online Shopping: Justin & Kelly Cardwell were forced to buy a house sight unseen. A new job in Colorado meant the Cardwells had to find the perfect home—from Arizona. Photo by Matt Nager
Even as it became easier to see homes in late spring 2020 and beyond, some buyers still tried to boost their chances of getting a house by bidding before actually visiting. “The experience of purchasing a home in Denver right now is similar to buying something on eBay,” says Daniel Dixon, owner of the Dixon Group at Keller Williams in Centennial. “ ‘Hey, this just hit the market, we’re submitting an offer now, and we’ll see it when we can.’ ” But, he notes, 3D-tour technology has gotten good enough to give buyers a feel for a place, even through a screen. “Writing an offer sight unseen isn’t what it used to be.”
Displacement And Dashed Hopes
The Denver metro market pushed many a prospective buyer right up to the edge of dejection. Meagan Gillcrist, 33, was one of them. A middle school special education teacher with Denver Public Schools, Gillcrist searched for her first home for seven months. “At first it was really exciting,” she says. “But as the season went on, all the houses just started to go. If there was one [in my price range], it immediately went under contract. It got very discouraging.” The two properties she did manage to bid on had multiple cash offers. “I’m not competing against any of these people,” she says. “It felt completely out of reach.” After a few tears, Gillcrist had decided to quit searching, but her agent convinced her to check out a few last townhouses before hitting pause.
Gillcrist liked one of them, a two-bedroom in Arvada, enough to make one more attempt. Although the property attracted around seven other offers, her $306,000 bid won. “My Realtor and I were both shocked I got it,” Gillcrist says. “I’m not sure what the deciding factor was, but she made a teacher plug—saying, ‘This is a strong offer, and she deserves a home.’ I don’t know if [the sellers] had a heart for that.” Gillcrist feels fortunate, but she knows others are struggling the way she was. “There are a lot of people like me, public servants who can’t live in the communities they serve because of the housing prices.”
For almost every successful sale in this market, there are five, 10, maybe even 20 disappointed bidders who lost out. Go through the process over and over, as many prospective buyers have, and it doesn’t take long for despair to set in. For a huge percentage of shoppers these days, a decent home feels unattainable—and that’s for higher-income, well-qualified shoppers. The situation has become even more dire for those with lower wages or credit struggles. And because the more “affordable” options—anywhere from the $400s and $500s in Denver to the $700s and $800s in Louisville to “anything under $1.2 million” in the city of Boulder, according to local brokers—were snapped up the fastest, finding housing has been toughest for those with the least capital.
Just as the pandemic has revealed existing inequities in access to health care, it has also exacerbated the gap between the haves and the have-nots in housing. Many of Colorado’s posh resort towns are already far too expensive for the teachers, bus drivers, and nurses who work there to actually live there. The Denver metro area’s soaring prices are pushing the Mile High City hard against that affordability limit now, too. At what point do we become another Seattle or San Francisco? “A young couple trying to buy a single-family home in Denver right now is almost priced out,” Moye says. According to a February 2021 report from mortgage data site hsh.com, a Denver household would have to earn $86,878.76 a year to afford the median home in the city (the ninth-least affordable metro in the United States). Median household earnings are just $68,592 (as of 2019).
It’s hard to blame people for wanting to live in Colorado, of course. But the revved-up gentrification amplified by the COVID-19 pandemic is exacerbating housing inequality. “A lot of Black and brown people who are lower income and wanting to buy, they’re forced to continue to rent,” says Monica Askew, an associate broker in Denver. “That is depriving them of the ability to build equity and wealth, and to have that pride of ownership. ”
Demand and prices have stayed high in the first part of 2021, and brokers expect that trend to continue, at least for a while. At some point, though, unaffordability will force a slowdown. “This area has some growth to it yet,” says CU’s Billings. “But it’s going to start hitting that threshold where the costs go up [too much]—in congestion, traffic, housing prices.” When that happens, people necessarily look elsewhere: to cheaper properties in places like Erie or Aurora; to smaller nearby metros like Colorado Springs and Cheyenne, Wyoming; and farther afield, to less populated locales, like Montana and Idaho. But right now? People want to live here. The pandemic didn’t change that—it just made the dream even more difficult to achieve.
Originally Appeared On: https://www.5280.com/2021/05/covid-19-created-the-hottest-real-estate-market-denver-has-ever-seen/