Denver, CO home sellers have enjoyed a profitable market for the past few years. The housing market was so intense that buyers found themselves offering more than the listing price. In fact, it wasn’t uncommon to see offers that were $10,000 to as much as $50,000 higher. It was a balancing act as buyers attempted to write competitive offers without trapping themselves by opting out of inspections or appraisal contingencies.
Buyers with modest budgets were often priced out in bidding wars. Between 2016 and 2017, 20 percent to 47 percent of homes in Denver were sold over list price each month, with the loftiest prices paid during summer. The cost of new homes is high, but things may be changing in the coming months.
Denver’s Housing Market Makes a Strong Recovery
The 2007 recession sent ripples across America’s housing markets. Many areas struggled but managed to recover. Denver was no exception. The region rebounded better than many other cities of the same size.
An analysis of 505 cities in the U.S. placed Denver as the 10th strongest overall. When compared to other equally sized metropolitan areas (over 300,000 people), Denver held second place. The analysis covered many areas including poverty rate, unemployment, foreclosure, labor-force participation, consumer non-housing debt, and home prices.
Average home sale prices in April 2017 reached a new record high at $439,161. That’s 40 percent or more over pre-recession averages. Experts also report that while property values are rising fast, there are no other indicators of an impending crash such as we saw 10 years ago. The market appears financially healthy.
Foreclosures are a key indicator of a potential downturn. There was a small increase in the total number of foreclosed properties last year, but it was still well below what was reported during the housing crisis. More than 8,000 foreclosures were processed in 2007. Last year, there were only 720.
Is the Time for Denver Home Buyers Here?
All good things must come to an end, and the Denver new home market may be seeing a shift in favor of the buyer. Janene Russeau, commercial real estate agent for Madison & Company, is managing the sale of the South Madison Way and East Phillips Avenue house which was listed at $639,000. The price was lowered to $599,000 to accommodate the buyer-friendly shift in the market.
Brokers are paying attention to home sales and values, which started to see a downward trend this summer. Seasonal slowdowns are not uncommon. It’s the long-term effects that concern investors. The median price for a single-family home in metro Denver remained at $410,000 between June and July. The median price of a condo saw a 2.9 percent decrease to $270,000,according to a Colorado Association of Realtors market update.
The county also saw lower prices, with single-family home median prices dropping 2.4 percent to $560,150. Denver county condos dropped 4.6 percent to $409,514. That’s a significant decrease for a month-to-month time period.
Average Home Prices May Be Misleading
Taking a closer look at the average prices within Denver’s housing market may shed some light on what’s affecting the trends overall. The median estimates are based on a mix of properties, including high-end and low-end homes. Higher-end houses appear to be the ones seeing the price drops. Affordable properties are selling quickly and often with multiple offers coming in. The lower end of the market is still bustling, with no indication that it will slow down this year.
The Denver Market Adjusts with Lower Home Prices
There are no signs that Denver is seeing a housing bubble that could burst, but there are some downward trends that will affect sale prices and property values. The number of closed sales has gone down as the number of buyers who back out after going under contract rises.
The main reason for this behavior is the high prices of homes and the lack of available properties. These conditions cause buyers to settle for properties that are less than what they wanted.
Homeownership is also becoming less attainable in Denver’s metro area. Prices are rising faster than income growth. The trend is not sustainable and eventually will have to change. An average home price drop of 9 percent is predicted over the next five years beginning in 2019.
Legislation Could Increase Denver Inventory
Colorado’s construction defects billcould reduce the growth rate to 4 percent to 5 percent. The current law has made builders reluctant to construct new condominiums because they could be subject to lawsuits when things go wrong. The new bill would make it harder to sue a builder for shoddy craftsmanship, making contractors less reluctant to invest in affordable housing like condos.
Condos tend to cost less than single-family homes. The current median for a condo is $270,000 while single-family homes are at $420,000. New condos could help alleviate the inventory shortage in Denver.