denver housing market: new year, more inventory?
/
By Dennis Huspeni | Published on January 5, 2022
Metro Denver homebuyers who thought it was tough to find for-sale homes in December will be sorely disappointed if they thought a new year would bring more inventory.
That lack of inventory is expected to drive double-digit percentage price increases again in 2022, according to the Denver Metro Association of Realtors' January report, released Wednesday. That's on top of a record-setting year for average sales price of residential homes, both single family and condominiums.
There were 1,477 homes for sale in the entire 11-county market at the beginning of January, according to the report. That’s a 34% drop from the number of homes available in December — 2,248. January's figure is also 42% less than the number of homes available a year ago.
There would be about 11,175 more homes for sale in a “normal” market — but Denver’s was anything but that in 2021.
“Last year, when comparing year-over-year data, it felt easy to call 2020 an outlier year,” Andrew Abrams, chairman of the association’s Market Trends Committee, said in a statement. “As we forecast 2022, it is a fair assumption that what was previously an outlier is quickly becoming the norm.
“With the historic lack of supply and continued demand, cities may start to change their policies but that won’t solve the problem in the short term.”
Metro Denver’s home sales market hasn’t experienced back-to-back years of double-digit appreciation since 2015-2016 and 1998-2000, according to the association.
The average sales price in December was $626,573, basically unchanged from November. Year-over-year, however, it jumped a whopping 14% from the January 2021 average sales price of $548,363.
On average, it took 18 days to sell a home in the metro area in December, up from 15 days in November. The average in December 2020 was 23 days.
“At the beginning of 2021, and through much of the summer, the common theme was perseverance,” Abrams said in the report. “It was unlikely to have one’s bid accepted on the first try and even more unlikely to get under contract at asking price. We saw median prices appreciate 19.78%. If you waited a year to buy the same house, the price would have gone from $455,000 a year ago to $545,000 today. In the real estate market, time is money — a lot of money.”
2021 marked the 11th consecutive year for sales price growth.
Interest rates remained low, so buying power was high, according to the report.
“Conforming loan limits increased to $684,250 in the Denver Metro indexing $37,050 higher than the nationwide confirming limits,” Abrams wrote. “This means that the majority of buyers can purchase a home for $750,000, putting down 10% without it turning into a jumbo loan. Even with inflation picking up steam and therefore increasing the potential of interest rates, I do not believe interest rates will have a material impact on housing until after the summer of 2023.”
The number of closings in December stood at 4,504, a 15.13% drop from November and 13.88% year-over-year decline.
For all of 2021, there was a record 63,684 homes sold, totaling $38.9 billion. In 2020, there were 63,501 closings worth $33.2 billion, and in 2019 there 58,899 closings worth $28.6 billion.
“2021 was a special year for housing. Not only were old records broken, and new ones set, but many were completely smashed,” Steve Danyliw, past chairman of the Market Trends Committee, said in the report. “Two numbers stood out most: low inventory and skyrocketing prices.”
“In 2021, we averaged $612,274, an increase of 16.68% from 2020. 2021 established a new historical high,” Danyliw said.
The previous record for percentage increase was 15.77%, set in 2000.
Danyliw noted the staggering 70.7% drop in inventory levels over the past two years.
“Since 1985, we have averaged 12,652 at year end,” he said. “The culprit: a decline of homeowners looking to sell. … If homes were sold at the local supermarket, the shelves would be sparse. At the end of the day, homeowners are reluctant to sell, not because it will be difficult but because those sellers will have to become buyers and compete for a home in an already thin inventory market.”