The December Denver Metro Association of Realtors (DMAR) report showed that the Denver housing market started stalling in early November. This was due to the sharp drops in home sales, very low inventories, and ever-rising home prices.
The number of available homes for sale decreased to 3,415 by the start of December. The inventories dropped by more than 50% over the year, making November’s inventory the lowest since 1985.
The DMAR market trends analysts further stated in the report that there were only 1,755 single-family detached properties available for sale last month. This listing equates to about 0.51 months of inventory, meaning that the entire market segment only had a two-week worth of inventory. This shortage called for an urgent supply of new listings.
Historical housing data in Denver dictates that home supplies usually dip by 10% between October and November. Inventories generally dropped by more than 29% as of last month, making it the largest drop on record.
This unprecedented change forced about a third of the listed homes in the single-family market to start going for more than $1 million. The increase in pricey inventories and the renewed COVID-19 restrictions are to blame for the drag in home sales throughout November.
Even though the number of closed property sales throughout November dropped by 25.5% to 4,820, it still increased by 11.9% compared to a year ago. Closed sales for the single-family property units decreased by 27.7% while that of townhouses fell by 19.5%.
From the DMAR report, homebuyers can be relieved to note that price gains leveled off by the end of November.
Single-family detached houses had a median closing price of $513,000 last month, a 0.39% drop compared to October and a 14% increase relative to the previous year. The attached home market segment had a median closing price of $335,000 that marked a 0.59% drop compares to October and a 7.4% year-over-year increase.
The historically low interest rates and house hunting challenges
As we continue to grapple with the looming pandemic, homebuyers can still take advantage of the low mortgage interest rates to increase their chances of locking in their dream home.
According to the latest Freddie Mac’s report, the new average interest rate for a 30-year fixed mortgage is at 2.71%. Despite being the lowest rate since 1971, real estate economists caution that the sharp decline in home supplies combined with very high demand for homes will continue fueling the rapid increase in home prices and erode the advantages of low-interest rates.
This claim generally means that even though home buying appetite is very high throughout Denver, the overall lack of inventory is already dictating how high or low home sales can go.
According to NerdWallet’s recent survey, the Denver housing market was ranked 11th least affordable for first-time homebuyers in a list of 50 large metro areas in America. In comparison to Seattle, the median list price for all available properties in the Denver market in the previous quarter was nearly six times the average income of buyers between the age of 25 and 44 years.
Overall gains in home prices are potentially setting the stage for problems going into the New Year, especially when interest rates will start to rise. Financial analysts warn against stretching beyond three times your household income when buying your first house.
Besides the unexpected boom in the Denver housing market for most of 2020, the Colorado Association of Realtors (CAR) reported that Denver had less than 3,000 single-family property listings and less than 2,000 townhouses in November. These listings represented a year-over-year drop of 70% and 48% for the respective house types.
The Denver holiday-housing market takeaways
Data from the CAR report highlights a 15.6% rise in median home prices and a 0.6-month worth of inventory left this month. It further breaks down and shows how the median list price to median sold price ratio surpassed 100% for the first time this November and prominently contributing to the overall increase in median home prices throughout Denver.
By the start of December, the report continues to show how the Denver housing market saw a 38% rise in home sales compared to the same time last year and 42% more than November 2018. Homes took a staggering 18 days in the market awakening the traditional winter lull and making it resemble spring’s marketing trends.
Even though securing affordable housing during this festive season will be challenging, Woodruff is here to help. Contact our reliable and efficient Denver property managers for any of your real estate and property needs.