Realty reality check: The ins, outs and ughs of first-time homebuying in Denver

Marcie Black cradled her baby bump one afternoon last week while touring a four-bedroom, three-bathroom Centennial property. The 33-year-old envisioned her family’s life taking shape inside the home’s brick walls at the end of the neighborhood’s cul-de-sac.

Black and her partner Maurice Manley, 35, padded through the carpeted home, their heads on a swivel, pointing out all they loved: office space for Black, who works from home from their rented apartment; natural light for plant-enthusiast Manley; room for kids to grow and play; a backyard big enough for Black’s domestic dream of beekeeping.

They imagined a dog they don’t yet own bounding through the yard with their future children in pursuit. They tried to ignore the other house hunters — their competition — stomping through their daydreams.

As Black, Manley and their real estate agent huddled outside to discuss making an offer, the baby in Black’s belly kicked. Then she spotted bees buzzing around the front yard.

“It’s a sign,” Black said. “This gives me heart palpitations, but let’s do it.”

As would-be first-time homebuyers, Black and Manley are two of the countless cogs in Colorado’s hyperactive real estate machine, which has manufactured a housing market in Denver that’s “unlike anything we’ve ever seen,” said Kelly Moye, a Realtor and spokeswoman for the Colorado Association of Realtors.

It’s hard enough for experienced hands; for people trying to buy their first home in this market, it’s beyond daunting. The level of competition and lack of property inventory has turned traditional house-hunting in metro Denver on its head, replacing it with a process that demands immediate decision-making, virtually zero concessions by sellers, and access to unheard of amounts of cash, local real estate experts said.

The Denver Post interviewed local housing experts and renters looking to make the leap to homeownership who offered their advice — and a real-estate reality check for those entering the battle royale of homebuying.

Black and Manley entered the ring battered from past rejected offers, but hopeful nonetheless.

The couple put in an offer on the Centennial home.

Asking price: $565,000. Their offer: $650,000.

Black, Manley and their agent agonized all last weekend, wondering if they’d been outbid yet again.

“We knew it was going to be competitive, but not this bad,” Black said. “I thought we were good. I have good savings. We have good jobs. Now I’m selling stocks and Maurice is dipping into his 401(k) so we can be more competitive. I’m trying not to get my hopes up. It’s a struggle. I don’t want that feeling of being let down anymore.

“If we don’t get this one, I think we’re throwing in the towel for a while. It’s just too stressful with the baby coming.”

Reality check

First-time homebuyers in the United States made up 31% of all people buying homes in 2020, down from 33% in 2019 and the lowest share since 1987, according to a 2021 report by the National Association of Realtors.

In Colorado, first-time homebuyers were even fewer at 25% of the homebuying population.
Denver home prices had increased at an average annual rate of between 5% and 6% from 1990 to 2020, said University of Denver real estate professor Jeff Engelstad, but in the past couple years prices have increased by 15% to 20% annually.

“That is absolutely unsustainable,” Engelstad said.

The numbers tell the story.

Denver’s median sales price for a single-family home as of March was $745,000, up 18.3% from the previous year, according to data collected from the Colorado Association of Realtors.

In March, Denver homes only spent an average of eight days on the market before they sold, down from 16 days the year prior, according to that data.

The inventory of homes for sale in the same time frame rested around 264, down from 415 in 2021.

First-time homebuyers must understand the process is so much different than when their parents put down roots, Moye said.

They’ve got a 30-minute showing to decide whether they’re set on that house. If so, they’ve got to act immediately and put in an offer, she said.

Sellers aren’t making repairs anymore. Buyers are having to waive the right to ask for, say, caulking in the bathtub. If there’s a leak in the kitchen sink, Moye said, you’re going to have to fix it yourself.

And the appraisal no longer indicates what the house is worth. The determination of what a house is actually worth is what someone is willing to pay, she said — and people are willing to pony up.

“You’re going to die in that house”

The idea of the dream house 32-year-old Lauren Sposa and her partner had in mind when they started looking for their first home disappeared around 10 rejected offers ago.

“We had particular parts of the metro area we were willing to live in based on our commutes, and now we’ve just scrapped that,” Sposa said. “We were more particular about the neighborhood and details of the home, and now we really don’t care.”

Sposa, an attorney, and her boyfriend, a middle school band teacher, spent the pandemic in their $2,100-a-month Centennial apartment, saving up for a down payment on a house.

The couple agreed on a $450,000 budget.

“But if I look at a home that costs $450,000 and it’s in Park Hill, it’s going to sell for $550,000 and that buyer is going to have $100,000 over the asking price in cash, and that’s the difference between them and me,” Sosa said. “Ultimately, we have the cash we have. I can’t make it appear out of thin air. I’m hearing that people are using their 401(k)s to pay in cash, and we want to a buy a house, but I’m not willing to leverage my future like that.”

Engelstad said he’s seeing an overzealous housing market pressure young people into making irrational decisions.

“The residential market is plagued by exuberance right now, and that’s absolutely evidenced by the fact that you’re proud if you overpaid for a house,” Engelstad said. “It makes you a hero. Under what circumstances is that right?”

Engelstad urges first-time buyers to sit down and calculate what kind of a mortgage and down payment they can truly afford without just relying on what size of loan a lender will give.

“Just because you qualify for a big, giant loan on a big, giant house doesn’t mean you can actually afford it,” Engelstad said.  “You have lenders saying that the idea of 28% to 30% (of your monthly income) going to a mortgage is old-fashioned and maybe we could have up to 40% going to a mortgage.

“OK, now you can afford a bigger mortgage or house, but the problem is you’re going to die in that house because you’re not going to have any money to do anything else.”

Unrequited love letter

Black and Manley were willing to pay $650,000 for a house. The soon-to-be-parents, busting out of the seams of their two-bedroom Centennial apartment, began hunting around February.

Black, who calls herself “psycho frugal,” recently earned a promotion at her tech job, where she makes $120,000 a year. Manley earns about $65,000 at a nonprofit. The two pay $1,990 a month in rent and were eager to spread out in a home of their own.

Baby gear — a stroller, diaper boxes, bouncer, toys — sat in unopened boxes around their apartment last week in the hopes of expediting a move, but with the little one due in May, the deadline to either set up the nursery or find a new place weighed on the couple.

“The stress of this all is just too much,” Black said during an interview in their apartment. “We can’t keep doing this.”

Black and Manley were still reeling after losing out on what they thought would be their forever home a few weeks ago — a $575,000 house along the Centennial/Aurora border. Not only did they offer $50,000 above asking, but they wrote a love letter to the sellers to convince them they were the offer to choose.

“In it, we wrote we’re about to have a kid in a couple weeks and we picture our future here,” Black said. “We said we can picture our kids playing in this backyard. I already know what room we want for the nursery.”

Staring at his wall of apartment plants, Manley said in wistful longing, “It even had a sunroom.”

They were outbid by someone who offered $115,000 over the asking price.

“That’s how it’s been going with all of them,” Manley said. “We’ve looked at houses that needed to be completely flipped and still went for $50,000 over asking. We’ve tried to put in early offers to see if it wows them. We’ve waived inspections. We put offers in on two houses where the owners wanted to stay there for two to three months and they were not negotiating paying rent so they’d just live there for free while we paid our rent and mortgage.

“What more can we do to sweeten the pot?”

A success story

The secret to homeownership for 25-year-old BaileyAnn Anderson? Her grandma’s dog groomer.

Anderson and her boyfriend went down the traditional homebuying route of perusing open houses and chatting up Realtors, but quickly realized they were priced out of the market.