Denver Real Estate Market Update | November 2024

Denver’s Attached Home Market Defies Expectations

Are we witnessing a surprising surge in Denver’s attached home market despite soaring affordability challenges? It appears so. While many expected condo sales to stagnate under the weight of higher taxes, increased insurance premiums, and rising HOA dues, November’s DMAR market trends report is telling a different story.

If you’re feeling stuck working with condos? This one’s for you.

The condominium market is undeniably facing significant hurdles:

• Let’s start with higher property taxes: Property values as determined by the County Tax Assessor’s office increased 27% statewide in 2023, leading to a direct impact on the property taxes assessed. Today 63% of Coloradans pay above the U.S. average in property taxes. This trend is set to continue, with 2025 bringing an increase in the assessment rate from 0.0670 to .0715 and the elimination of the $55,000 exemption.
• Then there’s the increased insurance premiums: Colorado homeowners’ insurance has skyrocketed by 46% in the last two years. This spike adds a substantial burden to condo ownership, where insurance costs are burdened both individually as well as a shared community.
• And last but certainly not least is the rising HOA dues: Colorado now ranks #4 in the country for the highest HOA dues, averaging $401 per month. Astonishingly, 43% of our state’s population resides in an HOA, collectively paying a total of $3.9 billion annually.

You’d think these factors would drive Denver home buyers away from the attached market and towards single-family homes, But here’s the twist: Denver’s attached home market is defying the odds.

Despite financial headwinds, there was significant increase in activity within the attached home sector in October’s data:

• In the $500,000 to $749,000 bracket, pending home sales for attached homes surged 24%.
• Moving up the price ladder, the $750,000 to $999,000 bracket witnessed closed sales jumping by an impressive 41%. The closed-to-list-price ratio edged up from 98% to 99%, and the average days on market decreased by 41% compared to September. Additionally, the price per square foot increased by 16.34%.
• In the $1 million-plus market, pending sales soared by 63%. Days on market dropped by 72%, the close-to-list-price ratio nudged up to 96.73%, and the price per square foot saw a 15% increase.

What’s Driving the Surge?

Buyers are seizing opportunities in the attached home market, capitalizing on seller discounts and the dip in mortgage rates during September, which hit a 19-month low of 6.1%. This rate drop spurred a market-wide 2.35% increase in closed homes, 1% increase in pendings and a 1.57% decline in active inventory as buyers snapped up some of the stale listings. New listings, however, were down 7% across the market as would be sellers appear to be waiting for Spring.

Navigating the Condo Market Challenges

Understanding the financial hurdles attached buyers face is a crucial step in supporting their success. Agents need to present clear statistics on the escalating costs associated with condo ownership to set realistic expectations.

For Listing Agents: be proactive in your due diligence. Ensure the condo project is pre-approved for either warrantable or non-warrantable options. Working closely with a lender who can provide specific solutions for common issues is crucial. These issues might include:

• Wind and hail deductibles greater than 5%
• Reduced pre-sales on new projects
• Non-structural/safety litigation
• Rental ratios up to 100%
• HOA delinquencies up to 35%

Given the increase in attached activity, my team has been working closely with agents to pre-approve projects and navigate these hurdles with ease.

For Buyers’ Agents: pre-vet the projects clients are interested in. If you’re working with VA or FHA buyers, obtaining a Single Unit Approval can make all the difference. The Rueth Team goes the extra mile by getting entire projects approved. Having access to a strong and creative internal condo department, along with traditional and non-QM financing flexibility, supports a smooth closing no matter the market difficulties.

Why a Housing Crash Isn’t Imminent

Apart from the attached homes data, one data point that jumped out at me for October was the resilient home price increases.  The average close price increased 5% for residential, 4% for detached and 2.3% for attached. Looking at Year-to-date average home prices in Denver, they are increased 3% year-over-year. Median home prices year-to-date increased 2% year-over-year. Even with inventory levels dating back to 2011 and higher for longer mortgage rates, home prices continue to remain strong.  This will keep the affordability conversation alive and well. Yet, despite affordability challenges, a bubble continues to be unlikely as:

• 56% of all mortgage holders have a rate under 4%,

• 84% are locked in under 6%, and
• 40% of homeowners don’t have a mortgage at all.

These factors along with a record breaking $32.8 trillion in homeownership equity,  provides a cushion against widespread defaults that typically precede a market crash. Homeowners with low fixed rates are less likely to sell, restricting supply and keeping prices stable. Additionally, lending standards have remained tight since the last housing crisis, meaning buyers are more qualified and less likely to default.

Seizing Opportunities Amid Volatility

The recent dip in mortgage rates provided a glimpse into how quickly the market can shift. That temporary drop to 6.1% significantly improved affordability, sparked buyer demand, and the effects were immediately visible in the data. It serves as a powerful reminder that in every market—no matter how challenging—there are windows of opportunity.

Let’s Move Forward Together

Whether you’re an agent guiding clients through these complex times or a buyer looking to make your next move, let’s embrace the opportunities that exist in today’s market. Feel free to reach out with any questions or for personalized advice. Together, we can turn challenges into successes and find the right path forward in any market environment.

Well, that’s a wrap.  This is Nicole Rueth with the Rueth Team of Movement Mortgage and proud sponsor of the DMAR Market Trends Report and your November Update.

Nicole Rueth
SVP, The Rueth Team Powered by Movement Mortgage