As another beautiful summer begins, Denver, Colorado’s single-family real estate market resembles a pot simmering on the stove. New listings have kept the market relatively stable, but as prices slowly rise, sales are falling. This year, prices may reach heights that prevent new listings from maintaining market stability.
Denver’s problem, in a nutshell, is that it doesn’t have enough inventory to meet demand. Home prices are higher than incomes, which keeps local families from becoming homeowners, making Denver the “most expensive non-coastal market in the country” according to Colorado Public Radio.
New record price
According to the Colorado Association of Realtors®, “despite a 27% increase in the number of new listings for March and April, the sold and pending listing volume negated any improvement in the number of active listings in both Denver and the state as a whole.”
Furthermore, the Colorado Association of Realtors® states that due to increased demand, “the median price for single-family homes reached a new record at $445,000 in the seven-county Denver metro region, up 1.2% from its previous high in June 2018. The average price for a Denver-metro home also topped the record chart in April at $529,745, up 2.4% from a year ago.”
The average sold price for a home in the Denver market is over half a million dollars
A week later the president of the Denver Metro Association of Realtors pulled no punches in an interview with Denver’s Channel 9 News.
Time is running out
“We are reaching our peak. There’s only so much farther we can go as far as home prices,” Heather Heuer, chair of the Denver Metro Association of Realtors® said in an interview with Denver’s Channel 9 News. “I have seen homes that have had 30 offers or more. Now we see two to five.”
Heuer encourages buyers to take advantage of the current market climate, “you have a lot more options…you may be able to talk to the seller a little bit about some wiggle room or concessions that you might want.”
Increased inventory has moderated price increases and kept Denver’s real estate market out of the woods in the first quarter.
What happens next?
Denver is in for a series of price corrections as the market seeks to attract buyers and restore demand. As prices simmer, the equilibrium between supply and demand is restored, but it might not happen until the end of the year.
The second half of the year will be a better climate for buyers. As year-end approaches, sellers become more motivated by offering incentives, or aging listings may lower prices. With that said, the Colorado Association of Realtors® highlights that the minor price declines which may take place later this year won’t be enough to change the fact that Denver’s market is overvalued. If demand soars in response to refreshed inventories next spring as it did this year, Denver’s housing market will start to boil again.
Too many people, not enough houses
With the cost of their housing, Denver is contributing to the end of its growth. Newcomers accounted for 59% of their growth between 2010 and 2017, but now the flow is slowing. For the past two years, population growth has fallen to 1.4% from 2% as outmigration increases, according to a study conducted by The Denver Post. Population growth isn’t the only obstacle Denver has to overcome when it comes to their housing market. New home construction is another piece of Denver’s housing puzzle that isn’t falling into place. By one estimate from The Denver Post, Denver needs 16,000 to 18,000 new homes a year, but new homes are falling short.
Over the long term, Denver will need more homes, fewer new families, and higher incomes to remove the drama from its real estate economy.