All major indices show rising home prices in Denver, Colorado. This comes as no surprise, when you look at what’s happening on the supply side of the market.
Housing supply in this metro area has declined significantly over the last couple of years. As a result, Denver now has one of the hottest housing markets in the country.
Sellers in this market are enjoying relatively quick sales, while home buyers are frustrated by a lack of inventory and stiff competition. We expect these conditions to continue through most of 2013, if not for the entire year.
RE/MAX: Limited Housing Supply in Denver
Earlier this month, RE/MAX published their National Housing Report for January 2013. Being the first report of the year, it offered a look back at the major housing trends of 2012.
According to the RE/MAX report, Denver’s real estate market had one of the lowest levels of supply at the end of 2012. Denver’s “Months Supply” level sank to 3 months in December, almost twice as low as the national average (5.7 months).
What’s good for sellers is tough for buyers. A few years ago, the market was cooler and buyers had more negotiating power. But growing demand and limited supply have tilted the market toward sellers. It’s a situation where homes are selling quickly, often for the full asking price. In 2013, Denver home buyers will have less negotiating power than in years past.
Bidding wars began to make a comeback in summer of 2012, according to a CBS report from last July. Today, six months later, they are a common occurrence.”This is not the market for low ball offers,” said Nicole Wadsworth, a real estate agent with New Era Realty.
Realtor.com: Low Inventory Age Suggests Quick Sales
For another view of the supply situation in Denver’s real estate market, we can look to Realtor.com. According to their last measurement, the median “age of inventory” for the metro area was 54 days.
This measurement gives us some insight into how quickly homes are selling, relative to other cities. Out of 146 metro areas included in the report, Denver had the fourth lowest median age of inventory. Only three California cities were lower (Oakland, Stockton and Sacramento).
Stated differently, Denver’s housing market is one of the hottest in the country right now, when measured by listing length.
Realtor.com also reports a significant drop in inventory across the metro area. According to their data, the number of Denver homes listed for sale dropped by 24%, from December 2011 to December 2012.
Trulia: Denver One of the Top 5 ‘Booming’ Real Estate Markets
Jed Kolko, the chief economist at Trulia, recently compiled a list of housing markets that are currently “booming, rebounding, humming or struggling.” To create the list, he analyzed price trends, job growth, and other indicators of market health. Denver was listed as one of the most booming real estate markets in the country, third in line behind San Francisco and Seattle.
Of course, this won’t come as news to the area’s real estate agents. Most are well aware of the inventory crunch. According to Marianne Bandy, a local real estate broker, “buyers are having a tough time finding good quality homes to purchase. This is causing prices to rise.”
The S&P/Case-Shiller Home Price Index released this month contained data through the end of November 2012. According to that report, home prices in Denver have risen 7.8%, year over year.
DataQuick reports that the median sale price in Denver rose by nearly 14%, between the fourth quarter of 2011 and the same period in 2012.
While the area’s unemployment rate is still high by historical standards, it has improved over the last three years. Last month, the unemployment rate for the Denver-Aurora-Broomfield metro area was 7.4%, down from a high of 9.7% in March 2010. If the metro area continues to gain jobs in 2013, it will bring more home buyers into the market. This would bode well for home prices.
No matter which source of data you choose, the story is the same. The Denver real estate market is in a solid state of recovery. What will 2013 bring? Given the trends and conditions we are seeing right now, it’s reasonable to expect additional price gains throughout 2013.