FELL OUT OF ESCROW? WHY NOT BUY A CHATEAU?!
January is a time of quiet reflection and a great time to set new goals. At Your Castle, we are no different. First, we calculate the top fifty agents for the year. Then, we figure out the average home price appreciation in Metro Denver. Plus, we wrap up our year-end taxes. Finally, it is nice to reflect on the more fun stories from the past year with so much accounting happening.
Recently, we focused on the record-shattering sale of Mike Shanahan’s mansion and got great feedback. So we thought, “What was the 2nd most expensive home sale in the area last year?” Surely Mr. and Mrs. Shanahan’s mansion could not be the only groundbreaking sale in this crazy market. The Denver area saw the highest million-dollar home sales ever last year. So many that DMAR was considering redefining their definition of what qualifies as a luxury property. After deliberating, they decided to keep their current threshold of $1MM, set arbitrarily back in 2013.
Anyway, we found a recent article from the Denver Post that helped answer our question above. The #2 most expensive home sale in 2021 was a literal castle called “Chateau V” in Evergreen, Colorado. After sitting on the market for five long years, the castle finally sold in November. It is a massive 21,692 square foot, four-story chateau featuring six bedrooms and eight bathrooms and sits on a 35-acre parcel of land. Suppose that was not enough to excite and astonish you. In that case, the castle also features a two-story library, a great room with 25-foot ceilings, 126 custom chandeliers, four fireplaces, and wrought iron accents throughout. According to the Post, the design was inspired by the Biltmore Mansion in North Carolina. It took Boulder’s BVZ Architects 9 years to build and was completed in 2016.
A YEAR-END REVIEW OF THE MARKET
RISING INFLATION & INTEREST RATES SPELL HIGHER PRICES
The 2021 real estate market was like 2020 in some ways: the high demand for homes, low inventory, and even the overall showing traffic patterns. But a couple of elements that were markedly different were skyrocketing inflation and rising interest rates. In the last newsletter, we focused on inflation, which essentially measures what consumers pay for goods and services. The headline here is that inflation in the U.S. hit its fastest pace since 1982, rising 7% in December. In addition, this marked the third straight month that inflation exceeded 6%. The main driver for these dramatic inflation increases is pandemic-related supply chain issues.
The other significant difference about 2021 was that mortgage interest rates, kept artificially low by the Federal Reserve as an attempt to lessen the pandemic’s blow to the economy in 2020, started to see an uptick once they announced they would gradually discontinue those measures. As a result, mortgage interest rates just hit pre-Covid levels for the first time in 2 years, around 3.8%. Mortgage rates are still low compared to historical levels, but the rates have been sharply rising since the year began.
What does all of this mean for the 2022 market? The net result of housing supply and demand imbalances, rising inflation, and rising mortgage interest rates is that home values are set to increase again this year sharply. There is no quick way to curb these issues without drastic changes and improvements to existing trade and infrastructure. With Washington politics in seemingly perpetual gridlock, it is unlikely there will be relief from these issues in the short term.
If you are a current home buyer, now may be your last chance to lock in a low mortgage rate before things get out of control. Unfortunately, as our in-house mortgage affiliates will tell you, there is a lot more room for interest rates to rise than to fall. These rate changes may seem insignificant, but they can amount to hundreds of additional dollars per month on your mortgage payment, on top of the sticker shock from now higher home prices.