Metro Denver housing market running on fumes
Metro Denver’s housing market showed signs of running out of gas and stalling last month, with sales dropping sharply and higher-priced homes dominating a dwindling supply of available listings, according to a report Thursday from the Denver Metro Association of Realtors.
The number of residential properties available for sale in metro Denver dropped to 3,415 at the end of last month, the lowest ever recorded for a November. The inventory is down by more than half over the year and just a fraction of the 14,488 listings averaged in November since 1985.
“For the single-family detached market, we only had 1,755 houses available for sale, representing 0.51 months of inventory. If no houses were put on the market for two weeks, in theory, there would be nothing left to sell,” Andrew Abrams, chair of the DMAR market trends committee and a Denver real estate agent, said in comments accompanying the report.
Historically, the supply of properties available for sale drops 10% between October and November on average. But this year, the inventory dropped by 29.2%, the largest decline on record. Almost a third of the single-family homes available for buyers in metro Denver are priced above $1 million, an unprecedented share.
A lack of “affordable” inventory, rather than tighter restrictions because of a resurgence of COVID-19 cases, appears to have dragged down sales last month. The number of homes and condos that closed last month fell 25.5% to 4,820, but remains up by 11.9% on the year. Single-family home closings were down 27.7%, while condo and townhome closings were off 19.5%.
One good note in the report for buyers — prices gains leveled off last month. The median closing price of a single-family home was $513,000 in November, down 0.39% from October, but still up 14% over the past year. The median price for an attached home sold was $335,000, down 0.59% month-over-month, but up 7.4% over the year.
Low-interest rates have left buyers anxious to lock in a home, even with a pandemic raging. Freddie Mac reported Thursday that the average rate on a 30-year mortgage dropped to 2.71%, the lowest in records going back to 1971. But the lure of low rates combined with a lack of inventory are pushing up home prices and leaving buyers frustrated.
“Despite persistently low mortgage rates, home sales have hit a wall. While homebuyer appetite remains robust, the scarce inventory has effectively put a limit on how much higher sales can increase. Unfortunately, the record low supply combined with strong demand means home prices are rapidly escalating and eroding the benefits of the low mortgage rate environment,” said Sam Khater, chief economist at Freddie Mac, in a release on rates.
Price gains are setting the stage for problems in the future when rates eventually rise. NerdWallet, in a study of 50 large metro areas, ranked Denver as the 11th least affordable housing market for first-time buyers. The median list price of homes in the third quarter was 5.9 times the median income of buyers in the 25 to 44 age range, comparable to Seattle.
Financial advisers typically recommend not stretching beyond three times household income when it comes to buying that first home, but that is becoming much more difficult to achieve in cities like Denver.