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 $455k home.
Lower interest rate = more buying power.
Don’t hold out too long. With the Fed increasing rates, mortgage experts are hinting the average 30-year mortgage rate will be closer to 5% by year end.
2017 ended with a significant increase in rental prices. Rents were up compared to 2016, but the increases are modest compared to the 49% increase from five years ago! The majority of rent growth for 2017 happened in the second half of the year. Are we in for another year of increases or will things stabilize with more inventory hitting the market in the first and second quarter of 2018? Stay tuned…
Median Denver Metro Area Rents ($)
People keep saying rent is expensive in Denver. We have a map to prove it. When you dig into it, median rents are above $1,500 in all but one neighborhood for the fourth quarter. The hot spots shouldn’t be surprising with the exception of Greenwood Village. Denver Tech center living is getting more attractive as well as pricey!
2017 was another wild year for Denver real estate. If there were three ways to describe it, it would be: low inventory, low days on market, and multiple offers. All three descriptors attributed to rising home prices and frustrated buyers who are getting priced out of the market.
The Most and Least Expensive Denver Neighborhoods
The median sales price for all of Denver County reached $395k in 2017; a number that has nearly doubled from $200,000, just ten years ago. Hilltop ranked the most expensive neighborhood, with a MSP of $1,115,000 and Goldsmith ranked the most affordable with an MSP of $143k. Breaking it out further:
- 31% of Denver’s neighborhoods have an MSP of greater than $500,000.
- 64% of Denver’s hoods landed in the $250k-$500k range, and
- 5% of neighborhoods had an MSP of less than $250,000, making it tough for buyers with a limited budget.
Map of Median Sale Price by Denver Neighborhood
$143,000 – $1,115,000 is a large spread, there are still some affordable neighborhoods (and even a few opportunities to score a deal in more expensive neighborhoods). Either route you go, fast action, well crafted offers, and of course, a strong offer price are required to come out on top of the negotiations when buying a place.
View map in larger screen here.
Denver Neighborhoods that Appreciated the Most + Least in the Last Year
One of the most common questions we get asked is, “which neighborhoods can we expect to appreciate the most in the upcoming years?” We can’t predict the future but we can rely on past market activity to give us a general direction of where we’re headed. (more…)
Let’s rewind, take a stroll down memory lane, and sift through 2017’s housing data…
Days on the Market and Inventory
The new year is here, but it forgot to bring new homes for sale along with it! The following two charts go hand in hand and help influence the median sale price. Notice any similarities? As buyer demand increases and the average days on the market decreases, inventory usually drops with it.
Dial back to 2012 and you can see we were in a neutral market and average days on the market were in the upper 60’s. Fast forward to the end of 2017 with inventory for detached, single-family homes at literally the all-time low. December saw a mere 800 detached and 839 attached homes (condos, townhomes) available for sale. That leaves Denver with a puny 1.5 months of inventory; still a strong seller’s market, with average days on the market lingering in the mid 20’s.
Inventory, nothing new here…
And the best real estate agent quote from the last five years goes to… “it’s a seller’s market!” Barring any domestic or global financial crisis, our inventory will remain low until Denver focuses on creating more “affordable” housing (i.e. dense condo projects). The city and state leaders need to make condo defect law reform a top priority for 2018. Stop putting bandaids on it. It’s time for a complete overhaul with both sides coming to the table to find a compromise that spurs condo development. If we can add 10-12k apartment units this year, there is absolutely no reason why we can’t increase our condo unit delivery rate to half that number by 2020.
There are two words to sum up the real estate market in November: seasonal slowdown.
Proof of this seasonal slowdown is in the amount of homes that were available for buyers to choose from, the average days that these homes stayed on the market, and the median price of a detached, single-family home.
Inventory was at an all time low, which is nothing new here! With only 1,427 homes listed in November, we had 1.3 months of inventory available in Denver. The average time that these homes stayed on the market was 30 days (in October it was 27).
And let’s talk about prices. The median sales price for a detached, single-family home was $438,500, a $7,450 decrease from October. Although, that’s a welcomed breather from the continual price climb, it’s hardly enough to move the median price to a more affordable level.
Usually the narrative about low inventory revolves around how quickly and how much over list price these homes sell, but this past month was a little different. Yes, we did see some awesome homes go quickly and over list price with multiple offers, but we also experienced our buyers not willing to pull the trigger on a home as quickly. Why? Because they just didn’t have many homes to compare them to. And since these homes stayed on the market longer, sellers were more willing to accept offers below the list price, which explains the decrease in median sales price.
So does this mean that Denver was in a real estate bubble after all and you should be worried about it finally bursting? We are pretty confident in saying no to that question. This seasonal slowdown is most likely just that: seasonal. And it is totally normal. We are in the busiest time of the year with all the holiday festivities of Thanksgiving, Christmas, and New Years. If this year’s seasonal slowdown is anything like last year, the market will most likely keep slowing down over the next couple of months and then pick back up around March or April.
Now, if we could just get the snow to fall a little like the real estate prices have!
Is it just us or has November been hot? We’re beginning to think Mother Nature has been basing temperatures on our “hot” real estate market. October’s median price is still hot, but the other four indicators are supporting a cool down. Better grab your coat!