The average and median single-family home prices in Metro-Denver both set a new record high, reaching $522,277 and $440,875 respectively, in April. The number of houses on the market increased in March over February by more than 30%, and there was a correspondingly large increase in the number of homes being placed under contract.
In short, the real estate market is hot here as summer bears down on us.
We often get asked, will the market cool anytime soon? First of all, it’s unlikely that Denver or Colorado will get less desire-able. This is a great market because people want to live here, and that’s not going to change anytime soon.
And, we should point out that ‘hot housing market’ is a misnomer for entire geographies like Greater Denver and Boulder. At all times, there will be pockets and neighborhoods that are lagging on home price appreciation. And even in the worst market, there will be coveted neighborhoods where an opportunity to get in, is worth the price.
So, absolutely, some neighborhoods could cool, which may give homebuyers who have been waiting in the wings a chance to get in. Sometimes supply increases when there is a major re-gentrification impetus for some pockets. For example, retirees might move elsewhere when there’s an influx of the millennial crowd.
Among the hottest neighborhoods we see among our home buyers are Cherry Hills Village, Downtown, and Bow Mar South. “Hot markets” are characterized by one or more of limited supply, super high demand and or extraordinary cash levels among buyers for home purchases.
But there are two economic factors that can cause a real estate market to cool. Let’s look at a handful.
- Demand cool down happens either when a) the cost of leveraging their downpayment (aka mortgage rates) rise up well beyond today’s levels or b) when the downpayment cash diminishes due to a major stock market correction. The former is a gradual trend. The latter could happen anytime. (If you believe you have someone who can tell you the date of the next market correction, I have a million-dollar home in Sloan’s Lake I’ll sell you, half off). When you see stock market corrections, watch for a housing correction to follow in the next 18 months.
- Supply glut happens when there’s a foreclosure crisis like in 2009-2012 or when market prices have risen to such levels that homeowners increasingly choose to cash out by selling for as much as they can get their hands on.
There is a chance that the market will cool somewhat from the white hot heat it’s maintained. Tell-tale signs of when this is happening include change in trend for the number of days-on-the market and when home prices stop increasing year-over-year for the same month.
We haven’t seen signs of that happening yet. Spring still reigns in the Denver/Boulder market.
By the way, what do you get for $500,000 in Denver? According to Christine Deorio of 5280, this:
“Of the homes that sold in February 2018, the median single-family home was 1,730 square feet, with four bedrooms and three bathrooms, and was built in 1985. The median condo was 1,200 square feet, with two bedrooms and two bathrooms, and was built in 1996.”