Metropolitan Denver ranks 12th in US for listing growth, yet home sales remain sluggish

Metropolitan Denver may be one of the top 12 housing markets in the U.S. when it comes to listing growth, but buyers are still hesitant to sign on and homes are sitting on the market longer.

Jeannie Tobin, director of market analytics for Homes.com in Denver, said listings were high throughout the summer, which stagnated prices across the metropolitan market.

The area's active listings hit a 14-year high in July, with 17,000 homes on the market. That number dropped to about 16,500 in August, but it still reflects a 22% year-over-year increase, Tobin said.

That increase landed the Denver metropolitan area in the 12th spot for listing growth out of the top 40 markets in the U.S. It also indicates that the Denver area "has shifted to a buyer's market," Tobin reported. "Local realtors have noted that buyers have been craving a market for years in which they don't have to compete with other buyers, can negotiate on prices, and can get items taken care of during the inspection. Buyers have many more options now than in many years past, and bidding wars have become the exception and not the norm."

"We're just now starting to see the increase in inventory impact the median sale price," Tobin added. “Denver's median home sale price increased 0.3% year over year in August to $587,000, lagging the national average of 2.4% growth."

Despite this, Denver is still one of the most expensive metropolitan markets in the nation; its August median home price landed it at No. 8 in the country, according to Homes.com data.

Certain neighborhoods across the state are really feeling the impact of buyer reluctance. Homes.com data shows prices in University Park increased by 86.2% but fell more than 39% in Roxborough Park.

Why?

Cooper Thayer, a spokesperson for the Colorado Association of Realtors, told Homes.com that there were so few sales in both neighborhoods for the month of August.

"Because there were only one or four closed sales in the neighborhoods during the period, the sample size is too small to be statistically reliable," Thayer said. "With so few transactions, a single sale can disproportionately skew the averages, making it impossible to derive meaningful trends or year-over-year comparisons. Larger datasets are necessary to establish market direction with confidence."

Thayer added that there were about four sales in University Park this month, which might indicate that the neighborhood is quite small and not seeing much real estate activity.

Kim DeGrande of ReMax in Roxborough said Roxborough Park and surrounding neighborhoods, such as Ravenna, are experiencing buyer hesitation like the rest of the state.

“We're definitely a micro market out here,” DeGrande said. “Sales have been very slow. If a home comes on the market that's really unique and desirable, it's still selling like the first weekend. But if there's anything wrong with the house, if it doesn't win the beauty contest because it doesn’t have the right color, paint or carpet or flooring, they're languishing for a while.”

There are about 1,050 homes in Roxborough, according to DeGrande, and on average, about 20 to 25 of them are usually for sale a month.

“We have seen definitely some significant price drops,” she said. “I'm hoping with our most recent (Fed) rate decrease, that we might see a pickup in activity — and so are all my sellers."

She said Ravenna has many listings, but because it’s a private country club development, the homes are pricey and there is a small buying pool.

“So, they’re sitting on the market a little bit longer, too,” she said. There are 250 homes in Ravenna, according to DeGrande.

In August, the number of new listings in the state's single-family market decreased 4.5% year over year, according to data from the Colorado Association of Realtors. The data also shows a 1.2% increase in the median sales price from $585,000 to $592,000. Homes are staying on the market for 56 days on average, nearly a week longer than last August.

Thayer and other industry experts say the buyer reluctance will likely continue through the end of the year.

“Encouraging buyers to get out there and look has been tough,” Thayer said. “Mortgage rates have certainly been that primary factor, but there's also just a lot of uncertainty right now about the economy.”

Thayer added that he anticipates the market will continue in its natural seasonal progression, slowing down in the winter with a drop-off in listings. This "is going to decrease competition between sellers, but the pace of buyers also decreases naturally in the fall,” he said. “In December, it's likely going to be a very similar environment as in September.”

Kelly Moye, a Colorado Association of Realtors spokesperson and broker in the Boulder area, said it’s challenging to get buyers even to attend open houses.

“Buyers are gold, and sellers are wishing for the good old days when they have 20 showings in a weekend,” Moye said in a press release from the association. “The tables have turned. It’s clear that the market is in a long overdue correction phase, and that’s likely to continue into the final months of the year.”

Despite significant price drops, the metropolitan's townhouse and condo markets failed to sway reluctant buyers.

The median sales price for the condo market declined 8.3% year over year in August, according to Homes.com data.

"Local Realtors have noted that condos for sale are in high supply due to the high office vacancy downtown, the luxury apartment supply wave and increasing HOA dues," Tobin said.

Data from the Colorado association shows that listings, prices and sales across the state are down and that the average number of days condos and townhouses sat on the market skyrocketed:

“Condos specifically have really been the most impacted, I think, by our price increases and inflation and insurance rate increases because that's impacted the regular assessments that condos experience,” Thayer said.

He added that the Denver market is especially seeing the impact on condos because that’s where a lot of attached housing is located.

“The downtown core has certainly seen, I think, one of the largest drops in in pricing year-over-year, to adjust for those condo market challenges so definitely a correlation between the density of multifamily or, attached homes and how price performance has been this year,” Thayer said.

Despite the Federal Reserve’s “risk management” cut to interest rates earlier this month, Thayer does not foresee enough of a drastic change that will make an impact on this year’s market trends.

“Interest rates, yes, are headed in the right direction, but it's unlikely that they're going to have a drastic impact on buyer perception until they are significantly lower, which I don't believe is going to happen for a little bit longer,” Thayer said.

DeGrande feels the upcoming price decreases will impact markets in the new year.

“This first price rate decrease is not enough, but they're still talking about another one in October and then another one in December, in which case, I think the first of the year is going to be spectacular out here,” DeGrande said.

Affordability also remains an issue for buyers in Colorado, said Chris Hardt, a Fort Collins broker and spokesperson for the state's realtor association.

“Buyers have many properties to choose from and more time to make a decision, but sellers have been resistant to lower the price of their precious commodity,” he said in a press release. “Combined with high costs for a mortgage, buyers are still being painfully stretched on the affordability front, leaving many, many buyers sitting fallow.”