Beginning in the second half of 2018, the Denver real estate market has been in the midst of a mild market adjustment. From multiple years of quick sales and skyrocketing prices, the current market has slowed down. Well, at least part of the market has slowed.
There is a misconception that the market is changing dramatically, with home sales down and prices hitting the top of the market. There may be some reality to this observation, but only in specific sectors. The market is adjusting both up and down based on location and price.
Let’s Break It Down
Properties over $1 million are certainly sitting a little longer, faced with an increase in inventory and slower sales than the same time a year ago. But the luxury market has always had a longer sales cycle than homes in lower price ranges. The universe of potential buyers is smaller, and even in the blazing market we experienced the last few years, the higher end still moved slower than the rest.
The single family home market between $500,000 and $1 million has shown the most dramatic change. Perhaps dramatic is an overstatement. There is more inventory available than a year ago, and sales are slower as well, but not by big percentages. Properties are sitting longer, but by weeks not months. In fact, the adjustments have moved us more towards a normalized market, but still not a buyer’s market.
In the under $400,000 market is moving at a fast pace. Inventory levels are lower than last year, and sales are strong. In fact, statistically, the under $400,000 market hasn’t begun to cool off compared to past years. There are still multiple offers and quick sales for great properties.
What’s Keeping this Going?
Even with reports that greater numbers of people are leaving Colorado, there is clearly pent up demand at the entry level prices. Interest rates are back to their lowest points in a year and are helping keep the market hot. Overall, the economy remains strong.
To further support the notion of pent up demand, the change in the Colorado Construction Defects law eighteen months ago unleashed a building frenzy of townhomes and condominiums. Much of this new construction is being completed and rolling out to consumers today. Even with the new-build addition to inventory, the under $400,000 market remains hot.
Why the Shift?
If everything is so great, why is there a shift in the first place? Part of the change does come from new construction. Builders are beginning to focus on more affordable housing, but much of what has been built over the last few years is in the mid- to high-range prices. The influx of new homes has taken some of the momentum from existing home sales.
There is also a level of buyer fatigue, where buyers are simply tired of looking and competing for homes. As prices continue to increase, buyers look to the more affordable homes and find the still-hot market to compete in. Housing isn’t the only area where prices are heading up. Living in Denver is more expensive overall, and buyers are beginning to re-think making Colorado their home.
The market will likely continue to slowly adjust in the direction of becoming a buyer’s market, but 2019 is looking like another solid, and higher priced year in Denver real estate. While the entry level market remains on fire, the mid-level provides great opportunities for buyers to find a great home and sellers to cash out on some built up equity.