Denver Real Estate Market Update | October 2023

We Will Never Return to Pre-Pandemic

We will never return to the pre-pandemic economy or real estate market.  While we were waiting for something extreme like the bubble to burst, rates to drop, foreclosures to surge, we found the economy resisted, inflation stayed sticky, and homeownership became an anchor for those who have one and a bone of contention for those who don’t.

Let’s jump into September’s market highlights and how “higher for longer” is affecting all things, including Denver’s homebuyers and sellers.

September came to a resounding end with the government averting a shutdown by passing a stopgap funding bill to remain open for 45 days, hoping time will solve their opposition.  The markets, however, were hoping for closure, so stocks wrapped up their worst month in 2023, keeping the trend as the S&P 500 fell 5% and the Nasdaq dropped 6% overall.  Meanwhile, “higher for longer” also permeated the bond market, as the 10-year Treasury yield rose to a staggering 16-year high of 4.71%, concurrently pushing the 30-year fixed mortgage rate to 7.65%, the highest since the Y2K scare.  These higher rates, coupled with stubbornly high home prices, have contributed to making home affordability the most challenging in three decades.  That kind of news makes you want to pull the covers over your head.

On the economic front, consumers are torn.  Consumer spending rose a solid 0.4% month-over-month, yet consumer confidence hit a four-month low as the cost of everything continues to drain savings accounts, and jobs are harder to come by.  But are they?  Job openings jumped back up to 9.6 million.  Yes, down from a pandemic high of 12 million, but more than double the 4 million available pre-2015.  Weekly jobless claims, measuring those laid off and on unemployment, hit an 8-month low in September.  Work-from-anywhere jobs continue to be plentiful, with Upwork estimating that 22% of the workforce will work remotely through 2025.  Wages in August?  According to the latest report at the time of this writing, they were up 5.73% year-over-year, down from a 15.28% year-over-year increase in 2021, but close to our historical average of 6.19% from 1960 to 2023.

The villain here is sticky inflation, making that 6% wage increase feel closer to a 2% bump.  The price of oil jumped 2% in September to a 10-month high as both Saudi Arabia and Russia cut supply to the global markets.  Oil accounted for over half of the inflationary increase.  Other notable contributors included vehicle insurance, up 19%; recreation, up 5.8%; and new vehicles, up 2.9%.

Consumers aren’t just feeling it in the inflationary telling numbers.  Their $1.77 trillion in student loans resumed interest accrual in September and payments in October.  Property tax disputes were won or lost.  And homeowners’ insurance increased by 21% nationally and 23% in Colorado.  Not to add insult to injury, but Colorado’s insurance premiums run 32% higher than the national average.  Then there’s that pesky $1.031 trillion credit card debt accruing at an average 22% interest rate, with Colorado spenders coming in at #11 with an average credit card debt per cardholder of $8,011.  September also officially marked the end of the pandemic’s savings binge, with the US excess savings depleted for the bottom 80% of households.

What does all this mean for Denver’s buyers and sellers?  If you ask many of them, they’re out.  Sitting on the sidelines waiting for someone or something to tell them seasonality, appreciation, and rates have all returned to normal.  What if normal doesn’t return?

September active listings had a strong 11% jump, but not necessarily because sellers were eager to take advantage of October’s best time to buy, but due to a 27% jump in days on the MLS.  New listings of 4,589 in September were actually down 6% from 2022 and off from 2012-2019’s more normal 6,000 during this month.  Closed units and volume were both down 20% month-over-month and even more than that year-over-year as those higher for longer rates, lack of affordability, and a higher cost of everything kept more buyers on the sidelines.

Denver home prices are also staying strong despite a typical phenomenon of high prices curing high prices (through a lack of demand); the dynamics of this market say otherwise.  Denver’s year-to-date median home is down 2.5% but up 0.7% from last month and up 0.9% compared to last September.  The strength of our housing market will continue to favor homeowners and frustrate home buyers.

Colorado has a 67.4% homeownership rate, 30% of them with no mortgage liability.  While misleading news headlines want to point to both Denver and Colorado ranking low in “paid off mortgages” compared to the national average of 38% being paid in full, I will continue to point out how strong Colorado’s real estate market is.  Ranked 50 out of 50, Colorado has the lowest mortgage delinquency of 1.7% and the lowest foreclosure rate of 0.1%.  And remember, 82% of mortgages are locked in under 5%, quite anchored into homeownership!

Buyers and sellers will duel it out.  Those wanting a home against those wanting to hold onto their homes.  For now, the supply and demand is staying in check, with higher rates holding back demand and safety and stability holding back supply.  The market will turn as interest rates drop or buyers decide the rate is no longer the most important factor to moving on.

In times like this, steeped in volatility, fear tends to step in and take the wheel.  However, understanding the intricacies of the market can help us navigate our buyers and sellers toward building wealth through real estate.  It’s critical to approach this market not as an obstacle but as a landscape of hidden opportunities.  By doing so, we’re not just reacting to market conditions but strategically responding to them.

Well, that’s a wrap.  Until next time, this is Nicole Rueth with the Rueth Team.  It’s my pleasure to keep you updated.

Nicole Rueth
Producing Branch Manager with The Rueth Team Powered by Movement Mortgage