Key highlights from this report:
- Recent housing forecasts for Denver suggest smaller price gains in 2020.
- Experts believe this real estate market might be nearing its peak.
- Home buyers have more inventory to choose from, as of summer 2019.
The residential real estate market in Denver, Colorado is something of a paradox right now. Inventory remains tight by historical standards, forcing home buyers to compete for a limited number of properties. And homes are selling faster than the national average.
Normally, those kinds of trends would relate to a housing market with rising prices. But the Denver real estate scene appears to be slowing down right now, as of summer 2019. (At least in terms of home values.) Gone are the days of double-digit annual price gains.
Here are the latest trends, updates and forecasts for this housing market:
Will the Denver Real Estate Market Peak in 2019?
Home prices within the Denver real estate market rose steadily over the past few years. This was largely the result of a lopsided supply-and-demand situation, combined with steady population growth.
In short, there were plenty of buyers in the market looking for homes, but not enough properties to meet all of that demand. This imbalance pushed home prices north at a steady pace.
Similar trends have occurred in major cities all across the country, over the past few years. Supply shortages increased competition among buyers. This led to bidding wars, offers above the asking price, and rapid home-price gains (the usual signs of a hot housing market).
But that appears to be changing. In March of this year, the Denver Metro Association of REALTORS® (DMAR) reported that the median home price for the area had declined, year over year, for the first time since 2012.
That was the first sign that the Denver housing market might be nearing its peak for the current real estate cyle. There have been other indicators since then.
More recently, in May 2019, DMAR chair Heather Heuer said: “We are reaching our peak. There’s only so much farther we can go as far as home prices.”
Heuer also mentioned that the Denver real estate market is cooling, in terms of buyer activity. Specifically, sellers are seeing fewer offers when they list their properties for sale. “I have seen homes that have had thirty offers or more. Now we’re seeing two to five,” she said.
Of course, this isn’t the only real estate market where home prices appear to be peaking as of summer 2019. As we wrote last month, similar trends are occurring in cities all across the country.
Low Inventory, Slower Home Sales
Housing inventory (i.e., the number of homes listed for sale) in the Denver area has increased a bit over the past year. That’s good news for home buyers, because it increases the chance of finding a suitable property.
But supply levels are still relatively low, when compared to most other big cities across the country.
As of late summer 2019, the Denver housing market had about a 1.8-month supply of homes for sale. (Notice the decimal there.) That’s quite a bit lower than the five- to six-month supply level that’s considered to be a “balanced” market, according to economists.
According to DMAR, homes are taking longer to sell in 2019 when compared to a year before. In July 2019, for instance, single-family homes listed for sale spent a median of 26 days on the market before going under contract. That was an 8.3% increase from a year earlier. That suggests that real estate market activity is slowing a bit.
The bottom line here is that inventory is currently constrained within the Denver housing market, and that could carry over into 2020. Buyers will want to give themselves plenty of time to find a suitable property and might want to consider surrounding areas as well.
Low Mortgage Rates Boosting Demand
Denver-area house hunters are getting another gift this summer, in the form of low mortgage rates. The average rate for a 30-year fixed mortgage loan has dropped steadily since November of last year, and is now hovering below the 4% threshold.
Low rates recently led to a surge in home loan applications, according to a key industry group. Application volume increased by 27% during the first week of June, compared to the previous week.
The research team at Freddie Mac predicts that 30-year mortgage rates will end up averaging around 4% this year. In its June forecast, issued earlier today, the government-sponsored mortgage buyer said that they:
“Expect mortgage rates to follow Treasury yields with the 30-year fixed-rate mortgage rate averaging 4.1% in 2019, before increasing modestly to 4.2% in 2020.”
So even though home prices in the Denver housing market appear to be cooling, a sense of urgency might still be warranted. Buyers who want to take advantage of today’s low rates should probably hustle. After all, there’s no telling how long they will last.
Disclaimer: This report includes housing market forecasts for the Denver area, extending into 2020. Those predictions were issued by third parties not associated with the Home Buying Institute. Economic and real estate forecasts are the equivalent of an educated guess and should be treated as such.