An increase in housing inventory across Colorado is leading to stagnant or declining prices in local markets — a win for prospective homeowners.
In July, the median sales price of homes in the Denver metropolitan area fell 0.8% year over year to $585,000, while the national average rose 2.1%, according to Homes.com data.
“As the market heads into the fall, the balance of power remains tilted toward buyers. Elevated inventory, slower sales velocity, and the prevalence of meaningful concessions create conditions that allow buyers to negotiate terms that fit their needs while still benefiting from stable home values,” Cooper Thayer, spokesperson for the Colorado Association of Realtors, told Homes.com. “For sellers, success will depend on accurate pricing, strong property presentation, and a willingness to be flexible. For buyers, this is one of the most favorable negotiating climates in more than a decade, and one where opportunities are abundant if you know where to look.”
According to a July report from CAR, the rise in inventory also led to homes staying on the market longer.
“We certainly saw a continuation of the trends that we've seen all year,” Thayer said. “Inventory has been the headline story. Obviously, we've got a big mismatch in the number of new listings hitting the market versus the number of listings sold. We saw that continuing to July this year. We had about a 14% increase in new listings versus only a 1.7% increase in listings sold compared to last year, so that resulted in a significant jump in inventory. We’re up to about statewide almost five months' supply of inventory, which is very unusual. Colorado is a very desirable market.”
Thayer said the biggest contributing factors include buyer hesitation and mortgage interest rates.
“It seems like a lot of people are still in a kind of a wait-and-see mentality, although we are seeing a lot more acclamation now as buyers start to get used to the new normal interest rates in the six-and-half-or-more percent range, but affordability is always going to be a challenge, especially in a high-cost-of-living market,” Thayer said. “When you combine affordability challenges with increased interest rates, increasing insurance, premiums, HOA dues and just overall inflation, that can make the barriers to entry a little bit higher, especially in the entry-level markets. That's where we really are seeing significant struggles, especially in the condo townhouse markets.”
Condos and townhouses see price decline
Median condo prices in the Denver area dropped 10.7% year over year in July, according to Homes.com data.
Additionally, CAR’s July report shows median pricing for townhouses and condos in the Denver area slipped about 2% over the past 30 days and is down 6.5% year over year to $392,500. Statewide, the median sales price for townhouses and condos decreased 1.2% from June to July, down just shy of 6% from a year ago to $400,000.
Jeannie Tobin, Denver-based director of market analytics for Homes.com, said various factors have restrained price growth, particularly the high condo supply.
“This is due to a combination of multiple factors: the high office vacancy rate in downtown Denver; the number of newly built luxury apartment buildings; substantial increases in HOA dues, mostly due to the increasing cost of building insurance; and more stringent lending guidelines for condos,” Tobin said.
In July, across the state the condo and townhouse months' supply of inventory dipped 1.7% from June to July but also remains up more than 31% from a year ago. In the Denver metropolitan area, condo and townhouse inventory hit 5.6 months, up more than 30% from a year ago, according to CAR.
In July, the average sales price statewide declined 0.4%, while the number of days condos and townhouses remained on the market rose 24%, from 50 to 62 days.
“So certainly, a different environment there. I believe the biggest contributing factor is going to be the affordability problem. I've started to use this comparison where for every $100 a month in HOA dues you pay, your purchasing power as a buyer decreases about $15,000 at current interest rates," Thayer said.
Colorado market continues to favor homebuyers
Local real estate agents say buyers have long wanted a market where they don’t have to compete, can negotiate prices, and can request repairs after inspections.
The CAR report shows that the median price for a single-family home in the Denver area decreased 1.6% from June to July to $630,000, down 1.2% from a year ago. Across the state, the median price of a single-family home went down just over 1% to $590,000, but it remains relatively flat with median pricing from last year.
In July, the 3,686 single-family sales across the Denver metropolitan area were down 8.8% from June to July. Throughout the state, the 6,221 sales in July were down 7.4% in the same time frame, according to CAR.
New listings for single-family homes statewide in July increased 6% year over year; the number of days homes remained on the market rose 13.6%, from 44 to 50 days; and the months' supply of inventory increased by 12.5% from 4 to 4.5.
“There are certain segments that are always going to perform well in our metro area, so we can look at Arvada or Littleton,” Thayer said. “Those are two of the suburbs in the Denver metro area that really contain a majority of the $500,000-or-less single-family well-constructed homes with no HOA. Those are incredibly attractive, and those are pretty much the only product we're seeing right now that have a lot of activity.”
On Monday, single-family properties on the market in Littleton on Homes.com ranged from move-in-ready, newly built houses by builder Lennar starting at $405,000 to a five-bedroom, seven-bath mansion on the 18th hole of a golf course for $7.5 million.
“I don’t think we're going to see significant changes barring any crazy economic changes like for example, if there were a significant drop in interest rates, but we're likely to continue to see a slower market,” Thayer said.
