With a 2-year-old son and a new baby, Erika and Jordan Scherner have outgrown their small ranch-style house in west Denver.
“As our family grew it felt like the walls were shrinking … we’re just really looking to expand and find a bigger house in the Denver area,” Jordan Scherner said.
On a recent Friday, the couple was standing in front of a four-bedroom house in Edgewater. It checks a lot of their boxes. For Erika Scherner, who owns a barbershop downtown, proximity to work is crucial. Jordan works in marketing for a credit union. He’s an avid skateboarder and would like space in the yard for his half-pipe. They like an open floor plan, and outdoor space for their dog.
It’s an interesting time to be shopping for a house. The Federal Reserve is raising interest rates to combat stubborn inflation, pushing mortgage rates up. That means higher monthly mortgage payments for homebuyers and, for a lot of people, smaller budgets to spend on that house. As the peak home-buying season gets underway, some homes are taking longer to sell and there are more options on the market compared to this time last year. That’s leading many to wonder if the two-year pandemic boom in home prices across Colorado — and the rest of the U.S. — is coming to an end.
So far, prices appear to be holding up. Take the Scherners. The couple became homeowners when they bought their three-bedroom house in the Barnum neighborhood about two years ago for $430,000. They just went under contract to sell it for $584,000.
That kind of increase is typical in Denver these days, where median home prices are up more than 40 percent since 2020 and bidding wars are the norm. The run-up in prices has made it difficult for families looking to purchase a home, especially first-time buyers.
It seems counterintuitive, but higher borrowing costs could actually be a good thing for people that have been locked out of the housing market, according to Benjamin Woodley-Rifen, the Scherners’ realtor, who works for Guide Real Estate.
“It’s helping the buyers right now get a little bit more chance because it’s deterring some of the pool that’s out there,” he said.
And even though rates are rising fast, they’re not that high by historical standards, Woodley-Rifen said. The rate on a 30-year mortgage is now just over 5 percent. That’s a big jump from last year, but not much higher than it was about four years ago, when the same loan would cost 4.9 percent.
“But people are so used to really low interest rates,” Woodley-Rifen said.
It seems inevitable that the market will slow as the year progresses. More people might put off buying homes with mortgage rates likely going higher as the central bank signals its intention to keep raising interest rates until inflation is under control. At the same time, economists think the odds of a recession are going up, and turmoil on Wall Street means households with investment savings are feeling less flush than they were just a month ago.
For the Scherners, who get a discount on their mortgage through Jordan’s job, it still feels like a good time to buy — especially with the cash infusion they’ll get from selling their house. The couple ended up putting in an offer of $800,000 for that house in Edgewater the same day they toured the home.
“It was 50 grand over asking,” Jordan Scherner said. “We felt that was a safe space that if anything did come up and we had to go higher that left us some room.”
They sweetened their bid by agreeing to a limited inspection, and a fast closing. But more offers came pouring in over the weekend. Within 24 hours, there was a bid for more than $100,000 over the asking price.
The Scherners ended up increasing their offer. They weren’t surprised they had competition — but they were caught off guard by how fast the price escalated.
“I don't think we foresaw it going as high as it would so quickly … It just completely surpassed what we felt was our strong offer from the get go,” Mr. Scherner said.
The Scherners didn’t get the house. Another buyer came in later in the process and outbid the entire field. Jordan says the couple is a little disheartened, but still optimistic. They already have another list of homes to check out.
“In a sense we kind of felt relieved as well. I felt like we went higher on that bid than we wanted to in the first place.”
