Fewer Doors in Denver Open for Homebuyers
Aldo Svaldi The Denver Post March 4, 2017
Good luck, homebuyers. Denver’s housing inventory is lowest in 32 years
The new low came despite a 19.25 percent year-over-year surge in the condo inventory.
Metro Denver had a record low number of homes for sale at the end of February, but a surge in sales can’t be blamed for the empty shelves.
There were 3,878 residential properties available for sale at the end of February, the lowest monthly total in records going back to 1985. The inventory was 2.14 percent below the previous bottom reached in February 2016, according to a report Friday from the Denver Metro Association of Realtors.
“It is incredibly low,” said Steve Danyliw, a Denver real estate agent and chairman of DMAR’s Market Trends Committee, which compiles the monthly housing market update.
The new low came despite a 19.25 percent year-over-year surge in the condo inventory last month. That wasn’t enough to overcome a 7.6 percent drop in the inventory of single-family homes available for sale.
“This is a temporary situation in the marketplace. It will be short-lived,” Danyliw predicted of the condo influx. But it offers an opportunity for first-time buyers in an otherwise super-tight market.
Danyliw, based on conversations with property managers, said more small-scale condo investors are taking advantage of record-high prices to cash in. The median price of a condo sold, which reached $255,000 last month, is up 14.6 percent the past year and up 5.2 percent from January.
Concerns are growing of a looming glut in new luxury apartments in metro Denver that could force a drop in apartment rents. If those soften enough, it isn’t a stretch to assume condo rents would also weaken.
Sometimes a surge in sales drives down the inventory, but that wasn’t the case in Denver in February. The number of homes sold in metro Denver fell to 2,805, a 12.2 percent decline from January and a nearly 13 percent drop from the same month a year earlier.
Although a big drop, sales are actually in line with the longer term average since 2000 of 2,851 homes sold in February. That, however, isn’t the case with the available inventory.
From 1985 to 2016, the inventory of available homes for sale in February averaged 14,635. During the housing boom, from 2003 to 2009, buyers consistently had more than 20,000 homes to consider, with 25,484 available for sale in February 2006, Danyliw said.
In short: The pickings are slim and it remains a seller’s market. In a twisted loop, the lack of inventory discourages potential sellers from listing their homes, making the inventory even tighter and discouraging even more sellers from listing.
“It becomes a self-fulfilling prophecy,” Danyliw said.
Homeowners who don’t have to sell and want to stay in the area may reason that waiting until spring and summer, when more listings hit the market, could improve their odds of finding a replacement home.
One measure of “have to sell” are distressed sales, i.e. foreclosures and short sales. Back in 2011, more than a third of the properties sold in metro Denver were “distressed.” But last year, only 1 percent of property sales were distressed, Danyliw said.
Listings, whether for condos or single-family homes, had spent an average 43 days on the market in February. Properties listed below $400,000, which remain in high demand, continue to sell quickly when they’re listed, within a week or two.
Elevated home prices, higher interest rates and financially stretched buyers will slow the pace of future home price gains as the year goes on, Danyliw predicts.
But last month prices continued their sharp ascent. The median price of a single-family home sold in metro Denver was $394,000 in February, up 11.4 percent from a year ago. The average price of a single-family home sold was $447,838, an increase of 8.6 percent from a year ago.