In Denver, Boulder and Colorado Springs Housing Markets, Supply Is Tight

Metro-area housing markets in Colorado are suffering from a dearth of inventory, and it’s driving prices north and causing bidding wars in some cases.

According to a recent analysis from Redfin, there is currently less than three months worth of homes on the market in both Boulder and Denver. Inventory has dropped sharply in Colorado Springs as well, according to another source. This forces buyers to compete for fewer properties, thereby increasing offer size as well as actual sales prices.

Housing Supply Short in Boulder and Denver, Colorado

In real estate, supply is often the differentiating factor between a buyers’ market and a sellers’ market. When there is a surplus of homes listed for sale, buyers face less competition and generally make lower offers (relative to the list price).

The opposite is true when inventory is limited. In these situations, buyers face increased competition and tend to make larger offers, often in “bidding war” scenarios. This is the scenario we are seeing in some of Colorado’s biggest real estate markets, as of March 2015.

According to Lawrence Yun, chief economist for Realtor.com: “We need a housing supply of over 6 months to have a generally balanced market between home buyers and sellers.”

By this standard, the real estate markets in Denver and Boulder are anything but balanced. Last month, Redfin reported that Denver’s supply was down to just 2 months, while Boulder was at 2.4 months. That makes them two of the tightest housing markets in the country, where inventory is concerned.

Perhaps this is why the economists at Zillow have made strong predictions for Denver home prices in 2015. According to the company, home prices in this metro area rose by a whopping 15% over the last 12 months or so. Their forecast calls for an additional 6% increase in house values over the next year — more modest than last year, but still higher than national predictions.

Inventory Down 36% in Colorado Springs Real Estate Market

Each month, Realtor.com compiles a housing summary with revealing data for 200 or so metro areas across the U.S. Among other things, their report shows how total listing volume has changed over the last year. In this context, “total listings” refers to the number of homes listed for sale on Realtor.com.

Here’s where things get interesting. According to their latest report, which contained data through the end of January 2015, total listings in the Colorado Springs area had declined by 35.9% in the previous 12 months. If this is a true indicator of the local real estate market, it means buyers have far fewer options today compared to a year ago.

You would think home prices would rise under such conditions, and you’d be right. According to the Pikes Peak Association of Realtors (which serves the Colorado Springs real estate market), the average sales price in February 2015 was $248,279. That marks an increase of 8.2% over the same time last year, when the average sales price was $229,246.