2018 was without a doubt an explosive year for Denver’s residential real estate market. As the dust settles (figuratively, not literally), here at Love Your Hood we’re bringing to light the market conditions affecting current and future Denver homeowners.
Interest Rates Falling
Interest continue to fall this quarter, as they have since reaching a 2018 high in October last year. Falling mortgage rates mean more buying power. In Denver, lower borrowing rates along with other factors have driven the price of both attached and detached homes up consistently over the past three months.
Home Prices Starting Another Climb?
Jumping into sales price; the above graph visualizes the end of a brief lull in Denver home prices in the final quarter of last year. The final patches of snow are melting away, the flowers are in bloom and Denver’s real estate market is heating up too! After last year’s record-setting summer prices eased off largely in part to growth of Denver County’s inventory. Now, Denver is experiencing the opposite–Dropping inventory and rising median home prices. Will median housing prices reach the rates they did last summer?
Housing Inventory Retreating Once Again
Denver’s supply of inventory grew slowly but surely from last July to a nearly 2.75 months this February (the most inventory Denver county has on record since October of 2013!!) Median home prices dropped over that time as inventory rose. The above graph shows the last year of inventory with a sharp drop off after February. Compared to last year, though, inventory in Denver County is high…
More Inventory in Denver, Yet Less Homes Sold
If the cranes dominating the Denver skyline and the orange construction cones guiding you to work every day could be quantified on a graph: this would be it. The above graph shows inventory and sales over the past month compared to last March. Across the geographic area represented above, there is one bar that dominates the graph: active listings in Denver County. With a significant bump in available housing going into Spring of 2019, homebuyers will have a multitude of housing options. It’s even possible median home prices will soften this year compared to last.
November home prices fell from the previous month, but still showed an increase of 7% from a year ago. The median November price of $465,588 is just shy of the yearly median home price. The bigger point to notice is the increase in housing inventory. While we’re still solidly in a sellers market, with 2.2 months of housing inventory (a 57% increase over this time last year), we’re steadily moving towards a more neutral market. It would be hard to not attribute some of this to the rising mortgage rates in a market that is continually becoming less affordable.
Interest rates continue to rise, and September’s brief lull in rising median home prices and sales has disappeared. Prices in October have reached a quarterly high. While inventory is up over last year it is down from the past month. Buyers expecting to gain some leverage in what appeared to be a home market about to recede might have to readjust their budgets. Some of us may be letting out a sigh of relief that average prices are below the $500,000+ mark we reached this spring. However, October is a reminder that we still live in one of the most competitive real estate markets in the country.
All “statistical” signs are pointing to a slowing housing market, with one exception. From the snapshot above one things sticks out pretty clearly: median prices are up. Lets dive into things and see what’s driving our real estate market.
If you’ve been following the Federal Reserve or listening to the news it shouldn’t be a big surprise to hear that rates are creeping up. Since July they increased by .13% (and .82% since Sept of 2017). If you are timing rates, now is the time to lock. If you wait, it will most likely cost you!
Now for a little more context… we’ve been really spoiled over the last five years with sub 4.5% rates! Just like when you are at an epic party — it has to end sometime, right?!
Ok, now we have it dialed way back to 1972. We are still in historically low territory compared to the last four decades. Just ask anyone that bought a home in the early 1980’s what they think of today’s rates. #perspective
Interest rates continued climbing throughout the second quarter, while median home prices started a two month decline. The struggle to find a home for the average buyer is still very real, there are some emerging trends worth keeping an eye on. Is the market changing or is it an early seasonal correction?
Does the chart below remind you of the elevation gain during your last run? 2018’s interest rates started out at 3.9% and are currently at 4.57%. Most experts predict continued increases for the remainder of 2018. If you are currently under contract, a conversation with your lender to lock your rate should be priority number one.
The last time interest rates were at the 4.5% mark was in December of 2013. For those financing their purchase, increasing rates decrease buying power. For those on a budget, that means lowering your max price to accommodate the extra interest in your payment. (more…)
Rising interest rates along with the Federal Reserves recent rate hike announcements should help cool Denver’s crazy housing market, right? In reality it’s actually tightening it up a bit. Buyers are starting to feel pressure on their budget not just from rising home prices but now increasing interest rates are reducing their buying power. Month’s of inventory keeps decreasing as consumption keeps increasing. We suppose the old saying, “get em’ while they’re hot!” applies this summer.
$512,250!?! Yes, that’s exactly how we said it when we saw the median prices for single-family, detached homes. We surely thought it was a mistake in our computations, but just like Santa we checked it twice. Home prices have been climbing a proverbial 14er since January, where they’re up a whopping 15.1% from this time a year ago. Interest rates are trending up, but buyer demand is still strong with inventory trickling down to 1.2 months. The length of time it’s taking homes to sell took a dramatic dive down to 20 days, almost a week shorter than the previous month. 88 more homes sold in April compared with March, indicating demand is just waiting for new inventory to hit the market.
Some good news for Denver renters — the rental market appears to be cooling down a little bit! As we head into our peak rental season expect rental rates to remain close to the same or increase ever so slightly. The exception to this will be sought after, hot neighborhoods where people are willing to pay a premium for high walkability.
Denver two year look back for median rental rates.
The first quarter started out relatively flat compared to the sharp increase seen at the beginning of 2017. New apartments have steadily been hitting the Denver market, helping to slow the rent increases we’ve been accustomed to. As we get into prime leasing season (May – August) we would expect to see a very slight increase for three and four bedroom units, since new units of this size aren’t being built as frequently as their smaller counterparts. One and two bedroom rent will likely remain flat and could even show a small drop due to the new inventory hitting the market each month.
Median Denver Metro Area Rents ($)
As we look at median rental rates around the metro area, one neighborhood that sticks out is Union Station (LoDo). Why? The 1 year change was -0.9%, mainly due to the increased competition from new rental units hitting the market. The 5-year change was only 1.7% — proof that added density and inventory is what Denver needs to curb rising rents.
View map in larger screen here.
Note: Think of this map as a 30,000 feet view of the rental prices in Denver. You can click on each neighborhood for exact numbers and year-over-year statistics.
Median home prices are still on the rise and it appears interest rates are starting to follow. In early February we started to see an abrupt increase in 30-year fixed interest rates. The Fed indicated there will likely be three rate hikes this year and they are starting to make good on their promise.
Interest rates are slowly but surely making their way back up to 2013 rates. One thing to note are the peaks and valleys that happened in 2013. We will be anxiously watching for any repeated trends over the next 12 months. If rates do ease, I would expect to see a small surge in purchases for those trying to time interest rate movements. That wouldn’t be a welcome addition to the buyer demand we are currently seeing.
Coming in hot at 4.4%, the current interest rate is at it’s highest since February 2014. This is a 0.24% increase from the interest rate in March 2017 (4.20%). That equates to an increase in the interest payment per month of 23 bucks per $100k borrowed.
But don’t worry, this is still incredibly low, especially when you compare it to the rates that the Baby Boomers bought their homes for — over 16%!
AVERAGE DAYS ON MARKET
Average days on market is the same as it was this time last year. In Denver County, homes are currently on the market for an average of 26 days. In December it was 37, which is an indicator of a seasonal slowdown. But now, things are starting to pick up and we desperately need inventory. Good homes are being snatched up quickly and over list price. Like $40k over list price!
Comparing “apples to apples” the average days on market are tracking the same or slightly downward for most counties, the exception being Broomfield.
1.2 months of housing inventory. That’s what we currently have in Denver County. Just a reminder: 6 months of inventory is what our market needs to even out and we haven’t seen that much inventory in years.
The amount of homes on the market have decreased by -0.7% since this time last year. In Denver County, 1,311 homes were listed and 1,109 homes sold this March. In March 2017, 1,482 homes were listed and 1,117 sold. It’s not that big of a difference but we need all the homes we can get!
MEDIAN PRICE RANGE
March saw the median sale price for all residential properties (attached + detached) in Denver hold steady at $425k from the previous month. Attached properties were hitting the median at $375k and detached at $471k .
This time last year, the median price range for detached and attached properties was $393k. That is a $32k increase from last year, a 8.1% appreciation rate. This is proof that Denver homes are continually increasing in value at an above normal appreciation rate.
Inventory is at an all time low. Again. And the median price range is at an all time high. Again. The median price for a single-family, detached home is now at a staggering $455k, which is an 11.5% increase from this time last year. With our continual low inventory, homes are still flying off the market, selling in an average of 29 days. Last year? Homes stayed on the market just two days longer. A (small) ray of sunshine: mortgage rates are holding steady. There was a slight decrease to 4.03% in February from 4.17% the year prior. In payment terms, that will save you roughly $30 a month on a $455k home.
Lower interest rate = more buying power.
Don’t hold out too long. With the Fed increasing rates, mortgage experts are hinting the average 30-year mortgage rate will be closer to 5% by year end.