Denver Metro Housing Reports

Did we peak in February? Both average and median price growth slowed in April. Looking back, month-over-month median price growth started out flat in January, yet low inventory and strong pending home sales provided a strong close-to-list of 102%. (meaning the average buyer was paying 2% over asking) In February, prices rose a strong 6.5% in one month, as active listings stayed depressingly low, pushing close-to-list up to 105%. March saw a swell of much-needed inventory if you can call 6,020 newly listed homes a swell, giving buyers a few more choices but no extra days. Days on market stayed at 4; while the close-to-list increased to 106.5% even while median home prices softened to a 4.8% month over month increase. April’s data reflected a slowing median home price growth again as it increased only 3.81% from last month with almost 7,000 homes hitting the market, yet the close-to-list continued to increase to 107%. 

A recession is exactly what we need right now. And it's good for housing. So what am I talking about? The two in tenure treasury yield had a small 0.05 spread as March ended. This is on the verge of inverting, which is a high validity recession indicator of five of the last six recessions that were all proceeded by an inversion. However, today we also have incredibly strong labor market. The unemployment number just came out at 3.6%, which is a post-pandemic low. In fact, unemployment has only been lower than 3.6%, three times since 1950 non-farm payroll saw robust 431,000 jobs added, which is alongside 11.3 million job. If you remember an inventory in 2018, when rates pushed above 5%, 1,827, new listings came on the market during March that's a 44% month of a month increase, but more than half of those new listings were scooped up as pendings increased by 1039 and closed homes increased by 941. While more inventory might give buyers a little more breathing room, they are not giving up with more inventory. We have more sales. This additional inventory is partially due to seasonality. I mean, some of it is investors taking their winnings off the table and others are looking at this intense demand and talks of a bubble and wanting to play the timing game. I think as prices rise, high prices are a bit of a cure for high prices. The appreciation much like inflation will slow down, but talks of a bubble assume high prices themselves are the tipping point and they aren't homeownership, equity of 69.2%, a vacancy rate of 1.6% and a high birth rate. 30 to 33 years ago, all starve off the bubble talks 75,000 annual equity gain for an average Colorado. In addition to a 0.01% Colorado foreclosure rate, and a 1.9% 30 day rate tells me that struggling homeowners don't have to sell at a discount just at market,

Denver appreciated 19.1% over the last year alone. 60% of all homes are selling over asking prices. The Denver Real Estate Market came in strong and fast in 2022. That fact, coupled with Russia's global actions is going to have an impact on our housing market more than just the liquidity we see circulating. It will continue to put upward pressure on a rising inflationary market, increasing the cost of everything. 2022 housing buzz words will include terms like global impact, market velocity, inventory shortage, shifting interest rates, insatiable buyer demand, rising inflation, and affordability. So, what are mortgage rates doing and where do we go from here?

Interest rates have been on a downward trend since 1981 when the 30-year fixed rate hit 18.5%.  Just three years ago they were almost 5%. Now, news cycles are headlining rates jumping from 2.625 to 3.25% in 2021 and climbing from 3.25 to 3.5% in 2022. If you bought your first home in the 80’s, 90’s, or even 2000’s, you're laughing out loud when the words “jumped” and “climbing” are used with rates in the low 3’s. The low rates in 2020 and 2021 both propelled and offset the insanity which was extreme housing demand with a limited supply.  I don’t have to remind you of what happened, but it does beg the question… Where do we go from here?

Comparatives are funny because they can tell any story you want. The market is slowing down? The market is still nuts! The idea real estate is hyper-local is at its epitome in times like these. Nicole dives into the Denver Metro local numbers and a bit about the economy but let's start with a story because perspective is everything."One of our clients this past weekend put in an offer and the listing agent and friend, Maura Putnik, called me and shared the seller side experience. Her $890,000 listing had 80 showings, 18 potential offersSix of those retreated when they heard where the price was headed, 12 written offers of which a few improved their offer, to have that one get the deal. In addition, four agents offered to submit a backup."

The July DMAR Market Trends data was released this week, and there are two notable trends. First, when comparing 2021 to pre-covid 2019, our seasonality is falling back into normal ranges. We have a healthy influx of listings which were up 8 percent, 2 percent more homes went under contract, and there were 7.5 percent more closings when compared to 2019, yet we continue to see three times the price growth. If I return to our current month-over-month or year-over-year and stop there, we are bleeding red. But the real story is in the green. Green month-over-month active listings are eluding to hope that more balance is on its way, yet green double-digit annual closed prices say that balance may not arrive too quickly. The second trend that stuck out is that year-to-date, homes priced over $500,000 are flying off the shelves compared to 2020 and 2019, with more homes at higher prices coming on the market, going under contract, and closing. Year to date 54 percent of all homes sold in the Denver market were over $500,000. In July, that number spiked to 74 percent. Where did all of the under $500,000 priced homes go?  

Buyers and sellers are exhausted by the extremes. Nationwide, new listings are up a strong 5.5% year over year and an even more impressive 11% from last month. In the Denver Metro, our new listings were up 6% from last year, and 24% from May. This added 7,826 homes to the Denver market last month, lifting our 2,000 active listings to a less than healthy, but certainly welcome 3,122 at the end of June. That's a 50% lift in one month, although it's still shy of a healthy market. The average active listings for June is 16,098. Days on market is still 4 for both detached and attached.Mortgage purchase applications dropped to a 5 month low. Pending home sales slowed down to a 2% gain from last month's 17% month-over-month increase.

The second half of May seemed to open up a bit. But, sorry, it was a false peak. Less inventory came on the market and more buyers went out looking for it. Inventory was down 6% from last month, and down 14% from last year inventory. 6718 homes went under contract, which was up 17% last month, and up 3% from last year.Active listings dropped last month. In fact, there was a 20% drop and inventory fell below 2000 homes for sale the second time this year. Listings are spending and average of four days on market. You have to be ready to pounce, offer 30K over asking, without any contingences and ready to close in 2 weeks. 26% higher close - higher end homes.23% higher close -medium priced homes.$700,000 average closed price detached. We are nowhere near the peak. Same with rates. Rates turned up mid-month.Inflation jumped 4.2% - the highest in 13 years. Core inflation jumped to 3%. This was the highest monthly gain - EVER. Get the rest of the insights by listening to this 9 minute episode. More false peaks are expected.

While the economy roars back to life, real estate continues to be judged.DMAR tells us that 2594 for sale - a lower than low figure. The previous low was 2015 with around 2400. Listen in for this recap. The months of inventory is currently  .51 months for detached homes, and detached inventory is currently at .46 months. Detached homes' median price is $585,000 in 11 counties, whereas attached are at a $376,660 median in 11 counties. With a substantial equity cushion, the Denver Metro area has been able to avoid the dreaded and predicted bubble. 2.5% of area homeowners have less than 10% equity, and 1.5% in the same region have negative equity. Builders have customers, but because lumber prices up 25%, steel up 160%, sheet goods up 400%, this has put a crimp in their ability to build homes ahead of inventory demands.

Let's start with strong demographics. 33% of home buyers today and for the next decade are first time home buyers with nothing to sell, taking from an already stressed market with nothing to give in return. At the other end of the spectrum baby boomers are delaying their downsizing, moving into assisted living nursing homes, or in with family due to their heightened pandemic risk, holding onto those homes younger families need. For new builders NAHB noted lumber continues to spike up with futures up another 35% on top of the already high 170% rise we saw over the last 10 months.