Denver home prices have been on the rise for the past three years. As one of the hottest markets in the country, Denver home sales have at times out-paced available inventory, causing demand and prices to rise. But there is some suggestion that home prices in Denver have peaked and a pullback in overall home pricing is not only coming, but may already be here.
The Word on the Street
Some area appraisers have indicated the market has leveled out, with prices at their peak and potentially in decline. While homes don’t always appraise for the purchase price, there does seem to be an increase in homes under contract not meeting the appraised value.
Real estate agents, on the other hand, aren’t seeing a decline. Lack of inventory and increasing demand has kept the competition between home buyers at peak levels. Homes continue to sell quickly and easily in the Denver market.
Price reductions don’t appear to be on the horizon based on the statistics. In 2017 we have seen the lowest available inventory in many years. In fact, the available inventory of homes, town homes and condominiums in February 2013 was 18,530 properties. Compare this to February 2017 with less than one-third that number at 6,111. The decrease in inventory combined with the increase in population is a recipe for rising housing costs.
The number of days a property is available on the market is an indicator as well. In February, the median number of Days on Market, meaning the time from a property being listed to going under contract, was eight days. With properties only being on the market for a week, it is the catalyst for the feeding frenzies we have seen over the last couple of years.
In the summer of 2016 Lawrence Yun, Chief Economist of the National Association of Realtors, predicted slower paced, but continued price increases nationally. He recently suggested price increases of up to 4 percent in 2017.
Rising interest rates will be the wild card to future housing costs. Higher interest rates could slow the market down, but even with mild rate hikes Denver should expect to see gradual increases in home prices through the remainder of the year.
What could change the trajectory? As Denver builders begin to catch up and provide more housing options, demand will begin to soften, and prices will reflect the increase in inventory.
There is another potential factor that could create a dramatic shift in housing costs. Many homeowners have held back on selling their property because of the difficulties in finding a replacement home. If the market appears to have topped out, there may be a rush to sell at the height of the market, creating a sudden inflow of properties for sale.