Denver Real Estate Market Update | March 2024

Has Denver Housing Become a Luxury Good?

Has housing become a luxury good? If you grew up in Colorado, you’ve watched the massive growth in population, traffic, wealth, and home prices; leaving you wondering if you can still afford where you call home. While no one likes the higher interest rates we’ve all experienced, the hope might have been that they would have forced prices to come down offsetting rising monthly mortgage payments and allowing buyers access to homeownership. Yet, after seeing a 4.7% drop in Denver’s Home Price Index (HPI) from June 2022 to March 2023, home prices have bounced back recovering all but 2.5% of the peak at year-end.  Based on DMAR’s March Market Trends Report, Denver’s year-to-date median home now costs 4% more than it did a year ago at this time.

According to Common Sense Institute, Colorado ranks 51^st in its Homebuyers Misery Index putting it dead last relative to the 49 other states and the District of Columbia. This declining affordability increased the number of hours a homebuyer in Colorado had to work given an average wage by an astounding 172% in 10 years’ time. In 2013, 42 hours of work would cover the monthly mortgage payment of a newly purchased average-priced home. In 2023, that number had now risen to a painful 114 working hours, or almost 3-weeks wages.  The index also noted that Denver’s housing unit deficit in 2023 ranged between 45 and 115 thousand more units needed in order to meet its growing population-driven housing demand. Despite a strong start in 2023, new housing permits in the Denver metro area dropped significantly after May and are still only permitting at a rate of 64% of the shortage.

Two weeks after Common Sense Institute’s report, U.S. News & World Report published it’s Hottest U.S. Housing Market report crowning Denver Metro as the hottest and most robust real estate market in the United States based on its index of demand, supply and financial health. The supporting statistics should be familiar as ones I’ve shared highlighting just how strong our local real estate market really is. A few of them include Colorado’s strong homeownership rate of 67.4% with the lowest national delinquency rate of only 2.0%; this compared to a national 65.7% homeownership rate with a 3.6% delinquency rate.  Going even further, Denver’s foreclosure rate is a mere 0.1% compared to 0.4% nationally.  More Denverites are also working as the unemployment rate sits at 3.3% compared to 3.7% nationally. This strong housing and job market, as well as Denver’s low 4.6% rental vacancy rate, will continue to attract investors as well as homebuyers.

Strong demand on limited supply offsets rules of affordability, by continuing to push up home prices despite higher mortgage interest rates.  In fact, Denver Metro saw a strong 2% increase month-over-month in February on a median-priced home and a 3.3% increase on an average-priced home, putting our home prices 49% higher than the national average.

But let’s talk about supply and demand for a moment. Because this is what’s interesting.  Demand isn’t actually strong.  In fact, mortgage purchase applications dropped 17% during the month of February and while closed units increased 31% from January, they are still down 0.45% from last year and down 30% from pre-pandemic. Pending Home Sales are also comparatively lower than pre-pandemic. Then there’s the inventory quotient. At 5,511 active listings at February’s month end, we have 46% more inventory than 2023, 350% more inventory than 2022 and still 14% more inventory than 2020. That’s not limited.

So, what your saying is with lower demand and more supply, home prices defy economic principles and continue to rise. Welcome to the Denver market.

Smart Asset lists Denver’s vibrant, 41% millennial-dense market as the fifth most sought-after destination. Many of those moving here earning over $200,000 a year and in line to gain their portion of the impending $72 trillion wealth transfer.

All of this to say, if you choose Denver as your home; now is the best time to buy. Honestly 3 years ago was a pretty good time and 2012 was even more brilliant. But if you didn’t then, now is your window, while rates are high.  Here’s why. Denver defies all odds. Nationally, the U.S. is starved for inventory, yet Denver is back to pre-pandemic levels and our home prices continue to demonstrate the impact of demand.  As a prospective buyer I’m looking at a 98.9% close to list, 2 months of inventory and 47 average days on the market as opportunity. There are still incredible choices and deals, they just might not be exactly what you are looking for. Be open to thinking outside the box, considering a home that needs work or is just outside your circle. Explore negotiation opportunities of rate buydowns or if over 62, consider how much more you can buy with a reverse mortgage for purchase. While this market might feel limited; a little strategy and creativity can go a long way.

Plus, what this market demonstrates more than anything is Denver’s resilient housing market is an incredibly strong and financially sound investment opportunity.

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