Forecast: Is the Denver Housing Market Starting to Level Off?

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 a bit 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.

Here are the latest trends, updates and forecasts for this 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.

In short, there were plenty of buyers in the market looking for homes, but not enough properties to around. This imbalance pushed home prices north at a steady pace. Similar trends occurred in major cities all across the country.

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.”

Denver home prices June
Chart: Denver median home price over the past 10 years. Source: Zillow.com.

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.

Other forecasts for this housing market also suggest that prices are leveling off in 2019. For instance, a June forecast from Zillow stated: “Denver home values have gone up 2.8% over the past year and Zillow predicts they will rise 0.5% within the next year.”

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.

We expect to see a continuation of this trend through the end of 2019 and into 2020, with more and more housing markets hitting price peaks and starting a moderate decline in values going into 2020.

Conditions Are Shifting to Favor Home Buyers

Home buyers planning to enter the Denver real estate market during the latter half of 2019 should have more properties to choose from. Housing inventory in the area has risen over the past year or so, and that trend could continue into 2020.

According to a DMAR report from June, the number of active listings within the 11 counties that make up the Denver metro area rose by 38% in May compared to a year earlier. That’s a significant increase in the number of homes for sale, and it should ease competition among buyers going forward.

While the inventory situation appears to be improving, the Denver housing market is still well below the 5- to 6-month supply level that economists consider to be a “balanced” market. So home buyers will want to give themselves plenty of time to find a suitable property.

Overall, the Denver real estate market is beginning to shift to favor buyers over sellers. In past years, inventory shortages and soaring demand put sellers in the driver’s seat. But that is now changing. As we wrote in April 2019, Denver is one of several major housing markets in the U.S. that are starting to favor buyers.

Low Mortgage Rates Boost Housing 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.