Here is a quick overview of the last 4 months of the Denver real estate market as of May 2022.
None of this will be a big surprise, but it will provide you with some data points for client discussion along with a conclusion at the end.
The first week of January started the 2022 year with an average sales price for a detached SFR at $692,698 or 10.3% higher than 2021 at $627,540. We hit a low average sales price of $652,227 at the end of January (Reminder, this is sales price, not average home value-most of these properties went under contract over Christmas, the majority of which is historically shown to be smaller homes often with fewer family members).
As of the end of April 2022, our average sales price hit $821,374 compared to $695,594 same time last year. The gap has widened to an 18% year-over-year price increase.
End of April 2020 had an average sales price of just $526,824, or a WHOPPING 55.9% price difference from today or almost $300,000 in real terms.
All property types have seen a similar acceleration in 2022 hitting an average of $715,804 compared to $618,397 for 2021 and $480,496 in 2020 or a 48.9% overall price change in 2 years.
LISTINGS, UNDER CONTRACTS, SOLD COUNT, AND INVENTORY
New listings started the year slowly, lagging prior years by approximately 25% through February. March and April saw a marked uptick in activity, however, holding pace with pre-pandemic levels finishing April with 6,510 new listings compared to 6,304 in April 2021 and 6,925 in April 2019 (Throwing out April 2020 as shelter in place was the end of March that year). The trend for new listings appears to be strong with two of the last three weeks’ total number of listings surpassing any of the last 4 years.
Inventory remains low, though climbing. While new listings have accelerated, under contract properties have kept pace, again affirming the current market demand. The first week of May was the highest number of under contract properties in a week over the last 4 years at 1,489, or a 17% increase over last year.
While most of the new inventory is immediately consumed, the number of available listings hit 3,090 as of Friday last week or 35.6% of last year’s 2,374 listings. 2022 is still 40% shy of 2020’s YTD inventory and Denver would need a 5-fold increase before we start moving into a balanced buyer/seller market.
Given how low inventory was at the end of 2021, it’s surprising to see the number of sold properties year to date. End of April hit 15,450 sold homes. This was 9.5% lower than 2021 but higher than any other year in Denver history. Again, the velocity of the market-driven by buyer demand.
The greatest indicator of buyer demand, independent of interest rates or any other economic factor, is showings.
Showings year to date for the Denver MSA hit 468,002. This is a slight pull back from the frenzy of 2021 which hit 502,846 same time last year, but only a 7.4% decrease.
However, compared to 2018’s 340,202 and 2019’s 336,487, current buyer activity is 38% higher.
Buyer activity and interest rates are the two key observable and predictive factors to short-term market activity. Buyer activity seems impervious to interest rate change.
This has driven days on market to another all-time low of 5.97 days on average…which is almost impossible.
Anticipate seeing some shifts in the percentage of homes that experience a price decrease and sell for over the asking price. While appreciation will continue, likely at a slightly slower pace and these two statistics will be lead indicators of that change.
BACK ON MARKET AND WITHDRAWN
In absolute numbers, these remain relatively insignificant. But for the first time in 2022, more properties have fallen out of contract and back on the market, and more properties have been withdrawn from the market, than in 2021.
For significance purposes, 2021 had 174 back on market properties in week 17, and 2022 had 216. 2021 saw 67 withdrawn listings in week 17, and 2022 saw 88.
These differences are meaningless, but as a lead indicator of buyer and seller patience, we’ll be watching.
OTHER MARKET CONDITIONS
Most recent estimates say Colorado is at approximately 100,000 single-family homes shy in building starts over the last 10 years. The trend for single-family home permit applications is approximately 28,000 annually throughout the state, and roughly 85% of those get built each year. If the population continues to climb, even with reduced buyer demand, building starts may not catch up for decades. This means continued appreciation.
The rate at which the Denver MSA population is increasing has slowed, but Denver is one of the few major metro areas across the country that increased population in 2021. Predictions are a Colorado increase in population by 1.8mm people by 2040, putting Colorado’s target population at 7.8mm. Estimates show 80-85% of that increase will settle on the I-25 corridor between north Pueblo and Fort Collins, or approximately 1.4mm people in the next 18 years. Think there’s a housing shortage now? Supply. Demand.
Colorado’s economy remains extremely strong with the diversification of health care, financial markets, tourism, and technology. With the average age being only 36 years old, industries have ample labor, an educated workforce (more women than men with advanced degrees) and are ripe for continued innovation.
The Colorado median household income is 10th highest in the country with a one resident household averaging $70,952 annually and 4 person households averaging $120,898 annually.
Inventory remains extremely low due to Denver and Colorado Springs MSA year-over-year population increase, building shortage, and lifestyle demand fueled by exceedingly low-interest rates. While monetary and energy policy has driven inflation and gas prices, and interest rates have caused some buyers to hit the “eject” button, the buyer market remains extremely competitive with high velocity and likely strong continued appreciation through 2023 (maybe beyond) as a result of the simple supply-demand equation.
Yes, we are watching the world stage. Geo-political issues have had a tremendous ripple effect on supply chains and consumption. Whether it’s fertilizer produced in Russia and wheat produced in Ukraine that will cause famine in some parts of the world this year, or shipping containers held at sea, micro-chips from Taiwan and China and labor issues worldwide reducing production driving prices of virtually everything even higher; Colorado real estate remains one of the best, safest and most wealth-building investments in the world.
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