How Denver’s Housing Shortage Is Impacting the Home Remodeling Market

Historic Neighborhoods | Factor Design Build Blog | Denver CO

There’s no question that Denver’s real estate market is booming and shows no signs of slowing down. Low inventory has been an issue within Denver’s housing market since 2011, and the current market is also being driven by strong buyer demand, as there was a 2.4 percent increase in the number of homes sold in the Denver Metro area in Q3 of 2020.

Yet, potential sellers may be hesitant to put their homes on the market during a pandemic. In November 2020, the number of active listings for residential homes hit a record low—with the number of total single-family homes on the market down more than 60 percent from November 2019.

An increasing number of buyers are looking for homes in established neighborhoods—or within proximity to Denver’s Coors Field, botanical garden, zoo and art museums—but are coming up short. Available homes are often older “fixer-uppers” that have serious potential but lack the modern turnkey features that homebuyers want.

As a result, Denver’s low inventory has led to a boom in demand for high-quality home remodeling services throughout the Denver Metro area.

Denver’s Housing Shortage Will Likely Continue

As of January 2021, Denver’s housing market was one of the hottest in the U.S.—only second to San Diego—based on the percentage of buyers who engaged in a bidding war.

Many factors are contributing to Denver’s housing shortage. It is an attractive city and a top relocation destination for many young adults; it ranks 16th in most walkable cities, and it achieves second place in the U.S. News and World Report’s Best Places to Live list.

Record low-interest rates encourage first-time homebuyers to step into the market and drive current homeowners to consider upgrading a bigger home that fits their needs or refinancing their current mortgage and putting some of the earned equity towards renovations.  

Buyers’ interest hasn’t slowed due to the pandemic. As many companies are continuing their remote work policies, many homebuyers were increasingly motivated to purchase a home once Denver’s stay-at-home orders lifted. This contributed to an uptick in pricing, and the continued shortage of inventory will likely drive pricing in 2021.

Despite the red-hot housing market, homebuyers remain in Denver and are searching for a fixer-upper that can be customized to their liking with a few minor changes or a total renovation.

Home Remodeling in Denver Turns Fixer-Uppers Into Dream Homes

Denver’s low inventory and climbing prices have caused many buyers to adjust their expectations to avoid being priced out of the market. As a result, a home in their price range may be smaller or older than initially planned. Home remodeling is an option for adding more space or modernizing an outdated home.

It’s not unusual to find a home at least 50 years old in the Denver market, as many homes were originally built between 1970 and 1979. In houses of this age, it’s not uncommon to have to replace structural components like a roof, HVAC systems, and possibly plumbing.

Additionally, some of Denver’s neighborhoods include historic homes. Upgrades would require a balance of replacing outdated appliances and amenities while still maintaining the historic charm, complying with any local ordinances, and possibly preserving original floor plans as opposed to opting for an open layout. A remodeler can find unique ways to incorporate upgrades that complement showcase features like original wood flooring, fireplaces, intricate woodwork, and stained-glass windows. If a unique feature is no longer in use, like a coal chute or root cellar, an experienced remodeler can convert this space into a wine cellar.

Modernizing an older home with updated aesthetics and amenities to include modern design elements can be a great way to upgrade a home without breaking the bank. This can include kitchen islands and expanded family room space for entertaining, luxury appliances like a six-burner stove, double ovens, or walk-in pantry spaces. For those with young families, upgrades may also include projects that make an older home safer, such as updating a home’s wiring, asbestos or lead paint abatement, or making sure porches and decks are up to current code.

If a smaller home is more in budget, an addition can be a fix for more space. Older homes are notoriously small and can become cramped as families work and learn from home. More space can be a necessity, and an addition can be the solution if a homebuyer has been priced out of the market on more spacious homes. Projects like adding smart home technology, efficient storage solutions, and lighting upgrades help make a smaller home more appealing. An upgraded outdoor living space can also transform a smaller home and take advantage of Colorado’s more than 300 sunny days.

Cookie-cutter homes can also be given some personalized flair. A homebuyer can upgrade the original fixtures or add new features to their homes like built-in shelving or organizers to reflect their own style and create more of a one-of-a-kind living space that they can call their own.

It’s not only buyers that are benefiting from Denver’s remodeling boom. Sellers who are preparing to put their home on the market also see the appeal (and price appreciation).

Sellers Also Benefit From Remodeling

Sellers may also want to consider investing in remodeling projects before listing a home on the market. Recently remodeled homes can increase a property’s value and encourage a fierce bidding war among motivated buyers. Depending on the project, a remodel can also “pay you back” if a home is appraised higher due to upgraded amenities. For example, the average payback in a home’s resale value is 56 percent of the cost of a remodel. Some of the remodeling projects with the highest recoup value include modernizing kitchens (80 percent), replacing windows and garage doors (75 percent), upgrading bathrooms (75 percent).

Upgrades can also work their magic by contributing to a home selling faster. In Denver, most homes are on the market for an average of 22 days as of March 2021. Renovated homes will look more appealing in virtual walk-throughs and MLS listing photos. Seriously, homes with great quality photos sell 32 percent faster. As more buyers are viewing homes remotely, it’s more important than ever for sellers to make sure their homes come across well in virtual showings.

Selling or Buying: Renovating Provides More Opportunities in Denver

Whether you are ready to sell your home for a profit or planning to turn a recently purchased fixer-upper into the home of your dreams, a reliable remodeling company is key. Make sure to hire a dependable design-build company you can trust to avoid projects that go over budget or keep missing their completion deadlines.

Factor Design Build is the best option for home remodeling in Denver, thanks to our team of expert architects, carpenters, designers, and project managers. We are more than just individual contractors—we’re a team of experts who offer personal service, innovative solutions, and fixed-cost pricing.

Contact our team to start discussing your project.

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How Denver’s Housing Shortage Is Impacting the Home Remodeling Market

  • There’s no denying that Denver’s real estate market has been booming.
    • Low inventory has been an issue in Denver’s housing market for several years, but it has become especially problematic since the pandemic.
    • There was a 2.4% increase in the number of homes sold in the Denver Metro area in the third quarter of 2020.
    • In November of 2020, the number of active listings for residential homes hit a record low — with the number of total single-family homes on the market down more than 60% from November 2019!
  • More and more buyers looking for homes in established neighborhoods are coming up short. The homes on the market are older “fixer-uppers” that offer a ton of potential but do not have all of the features homebuyers want.
  • That’s why the housing shortage has increased the demand for high-quality home remodeling services in Denver. This trend is also not expected to slow down any time soon.

Denver’s Housing Shortage Will Likely Continue

  • As of January 2021, the Denver housing market was one of the most competitive in the U.S. (based on the percentage of buyers who got into a bidding war). The only location with a higher percentage was San Diego.
  • Several things have contributed to the Denver housing shortage: 
    • Denver is a desirable location. It’s sixteenth on the list of most-walkable cities, and it’s second on U.S. News and World Report’s list of Best Places to Live
    • Low-interest rates have encouraged home buyers to invest in their first homes, refinance their existing mortgages, or upgrade to bigger homes.
    • Shockingly, COVID has not slowed down Denver’s housing market. Buyers seemed especially motivated after Colorado’s stay-at-home order was lifted and prices soared even higher. 
    • With many industries providing employees with the option to continue working remotely post-pandemic, more buyers may prioritize living in areas such as Denver with easy access to outdoor sports and hobbies.
  • Despite the red-hot housing market, people are still choosing to call Denver and the greater metro area “home,” and are opting for minor or total renovations to make their new house truly theirs.

Home Remodeling in Denver Turns Fixer-Uppers Into Dream Homes

  • The low inventory and high prices in Denver force many buyers to lower their expectations to avoid being priced out of the market. They may have to settle for homes that are smaller or older.
    • In fact, the average age of homes on the market in the Denver area is about 50 years old (with most homes built between 1970 – 1979)
  • Home remodeling in Denver can be the solution for an outdated home:
    • Some neighborhoods have historic homes
      • You want to preserve some of the charms while upgrading the outdated electrical, plumbing, and appliances.
      • Include features worth preserving (use this blog as reference)
    • Building an addition to a small home
      • Older homes are notoriously small, and with more people working and learning from home, more space is crucial — but not everyone can afford to buy a home with that existing space.
      • This isn’t just “during a pandemic,” there are upgrades we’ll all want to make to small, older homes! (use this blog to give examples)
    • Adding an outdoor living space to enjoy Colorado’s 300+ days of sunshine
    • Modernizing an older home with updated aesthetics and conveniences
      • Modern design elements
      • Space for lifestyle upgrades, i.e., a 6-burner stove, double ovens, claw foot tub, etc.
      • Family-friendly upgrades (older homes don’t always have the most child-proof design!) (use this blog to give examples)
    • Customizing a cookie-cutter house to create a personalized home
      • If your home purchase isn’t an old historic home with tons of character, you can make upgrades to make it your own and make it more modern.
  • It’s not just buyers who find value in home renovations though. Sellers choosing to put their homes on the market are seeing its value, too.

Sellers Can Also Benefit From Remodeling, Even in a Seller’s Market 

  • Sellers may also want to invest in Denver home remodeling services before listing their homes.
  • Recently remodeled homes can bring in top dollar and encourage a fierce bidding war from motivated buyers.
  • They can also “pay you back” in home sale value — meaning your investment in the remodel costs can be “paid back” in percentages. 
    • The average payback in a home’s resale value is 56% of the cost of a remodel
    • Replacing things like garage doors or windows can earn back as much as 75% in payback.
    • Kitchen remodels net about 80% payback
    • Bathroom remodels net about 70% payback
  • Upgrades can also help your home sell faster. 
    • Denver homes are on the market for an average of 22 days in March 2021. 
    • Renovated homes look great in pictures and virtual walk-throughs. With more buyers purchasing homes from a distance/virtually, sellers need to make sure their homes are ready to shine in images and videos — and sell faster.

Selling or Buying: Renovating Provides More Opportunities in Denver

  • Whether you want to sell your home for big bucks or turn a fixer-upper into your dream home, you need a reliable remodeling company.
    • Make sure you hire a reliable design-build company you can trust, so you’re not stuck with uncompleted projects or over-budget expenses.
  • Factor Design Build is the best option for home remodeling in Denver, thanks to our team of experts (architects, carpenters, designers, project managers).
    • We are more than just individual contractors — we’re a team of experts who offer personal service, innovative solutions, and fixed-cost pricing.
  • Contact our team to start discussing your project.

 

Additional Resources:

 

https://www.dmarealtors.com/denver-housing-gain-despite-coronavirus-recession-fears-guest-post

https://www.thedenverchannel.com/news/360/while-most-sectors-of-economy-struggle-amid-pandemic-colorado-housing-market-is-bucking-that-trend

https://www.cpr.org/2020/01/06/2020-is-looking-scarce-for-denvers-housing-market/

https://www.forbes.com/advisor/mortgages/new-home-construction-forecast/

https://www.rate.com/research/news/housing-shortage-construction-costs