Denver Real Estate Market Update | July 2024

Is the Denver Housing Market Heading for a Bubble?

I don’t agree that sellers think it’s 2022 and buyers think it’s 2008. While there have been a multitude of headlines and memes abating the experience, I think everyone is crystal clear on it being 2024… we just don’t know how to define this year yet. While we have been trying to measure it against typical seasonality; the influx of liquidity, uncertainty in the political environment, and the increased cost of everything has this market acting anything but typical.

The Wall Street Journal published an article on June 27^th claiming “You Might Be Buying Your House at the Top of the Market”.  They cited the continued rising prices being a warning sign of overvalued homes leading to a 2000’s bubble and that homes on average are now 25% overvalued. However, they went on to say in the same article that valuation isn’t much use for timing when to buy or sell a house as overvalued homes can get more overvalued. But that wasn’t the headline.

John Burns, a highly trusted housing research and consulting firm, uses their own Burns Affordability Index and at today’s 44% housing-cost-to-income ratio we are well above their new normal of 33%. Yet they go on to say in their most recent housing report “we believe housing is permanently more expensive.”

Then there’s the Realtor.com article which just listed Denver as the third most likely contender for price drops behind the state of Florida and Texas. They identified markets with the highest increase in inventory compared to 3 different years: a year ago, two years ago at the height of the pandemic housing craze, and then pre-pandemic 2019. They also looked at increasing days-on-market as a warning sign.

Denver’s inventory IS increasing, substantially. Yet, instead of seeing prices drop, home prices defied odds in June by increasing 0.8% from May and 2% from a year ago. Median home prices were up as well 1.3% and 1.5% month-over-month and year-over-year respectively. Year-to-date home prices are up 3.9% on average.  Are home prices up only to offset rate buydowns? Maybe. But up, nonetheless.

I want to break down this inventory comparison as well where experts think we are headed the second half of this year, and the opportunities you have as a buyer or seller in a shifting market. Because while the memes and headlines might tell you sellers think it’s 2022 and buyers think it’s 2008; I don’t think you do.  I just think you are trying to make the best decision you can with the mountains of conflicting information coming at you from all directions.

Before I get ahead of myself, do me a favor and share this.  Buyers need to hear their opportunity is now and sellers need to know what they are up against and how critical their pre-market activities are. And, if you want to keep getting market and home buying strategies, make sure to subscribe to my YouTube channel… it’s where all the cool kids are hanging out.  At least the ones that cashed in their crypto for a piece of land.

Okay, let’s break down the inventory first.  DMAR’s 11-counties saw another jump this month in active listings, increasing 11.5% from May to June with a final count on Sunday, June 30th of 10,214 units. This comes right after the 31% increase we saw from April to May. As a comparison this month’s ten thousand homes is up from just over nine thousand last month and six thousand last year.

If I compare our current inventory to June 2022 per Realtor.coms report, we are 69% higher. If I compare it to 2019’s assumed “normal” pre-pandemic, we’re 7% higher. There were 9,520 active listings in June 2019.

Then there’s days on market. I like to use median, but the media uses averages because they are typically bigger numbers, and bigger numbers sell, so let’s talk averages. Homes in the DMAR 11 counties took an average of 30 days to sell in June 2019.  That dropped to a screaming 11 days in 2022 only to come back up to 32 last year and 35 days this year. If it feels like homes are sitting on the market longer, they are, compared to the pandemic but not drastically different compared to 2019. Attached homes are taking most of the brunt as their days on market increased to 38 days along with their active listings increasing 82% last month alone.  This is a different story as attached homes are also working through increased insurance, taxes, and HOA dues as well as warrantability issues.

Denver’s inventory this month is higher than any month since September 2013. Now, let the record show that the inventory count was done on a Sunday. Last month was done on a Friday. Some argue, both days of the week are where you’d have more inventory for weekend sales. Without going back and personally scouring what day the last day falls on, I am going to assume that over the last 129 months (since September 2013) there were other counts which also occurred over the weekend evening out our comparisons.

Meanwhile, new listings hit their peak in May, a little earlier than normal with 16% less homes hitting the market in June. Sellers will continue to put houses on the market this year, but not nearly as fast as we’ve seen. This will slowly diminish active listing counts as we move towards December as buyers and investors alike start to find “deals” inside the inventory.

So what can we expect the rest of this year? Many experts agree.

Lawrence Yun, Chief economist at the National Association of Realtors, feels strongly that “the U.S. housing shortage is still lingering based on our estimate of 4.5 million additional housing units that are required to make up for the gaps accumulated from population growth in the last decade, making home-price declines appear unlikely.” He acknowledged that some metro’s are seeing price declines, but that “with rapid job growth, the temporary improved housing affordability will be short-lived before prices are pushed up to new highs.”

Andy Walden, vice president of enterprise research at ICE Mortgage Technology believes high rates will moderate and “when rates decline and begin to improve affordability, the pattern is the same and the result is increased demand and subsequently stronger home prices. It’s a cyclical Catch-22 that will likely keep a strong floor under home prices.”

Chen Zhao, head of economic research at Redfin added, “Home prices are unlikely to fall because of continued demographic tailwinds. There are still plenty of millennials looking to get into the housing market, which is fueling home-buying demand despite affordability waning.” And then there is Gen Z, while they are okay buying smaller homes than their bigger brothers, they want to own. Hommati.com found 97% of Gen Z’ers want to own in the future, 87% want to buy before age 35. And per John Burns, 42% of them will receive their down payment assistance from their families. Let the wealth transfer begin!

So as a buyer or seller in today’s market, what do you do in 2024?

Sellers, there are a lot of you! You need to take the time to strategize with your agent to have a competitive pricing strategy and honor the fact that buyers want a home they do not have to walk into and fix up. They are spending an insane amount of money right now with rising prices and high interest rates. I know you know it’s not 2022, so let go of getting what your neighbor got for their home and know you will get a deal on your buy side. It’s time to make new memories. Think about it…in 10 years, what will having held out for $25,000 more today matter?

Buyers, hang in there. The second half of this year is for you. Uncertainty breeds fear which leads to inaction. Many will sit and watch, so this is your time to take action. New listings will drop as they always do the second half. Actives will stay high as buyer demand is soft. Negotiate rate buydowns and be picky. Also, don’t buy like you’re going to sell in 3 months. Because you’re not! Who cares if prices slip because they will, they always do in the 2nd half. but know your selection of homes is larger today than it’s been since 2013 and will slowly get sold off as the year progresses. So combine negotiation opportunity with selection and stop waiting for life to continue. Build community and start your wealth journey today. Ps. I know what your thinking… .renting is cheaper and if prices slip, isn’t it better to wait. Maybe, maybe not. With owning, you get principal reduction, tax deductions, a place to build out that no one can take from you and yes… appreciation over the long run. Renting, you will be lucky to get your security deposit back, but hey, you’ve got your freedom.

Well, that’s a wrap for this month’s market update. See you next month, Nicole Rueth with the Rueth team and DMAR’s Market Trends Committee.

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