Is the Denver real estate market slowing down?
For years now, armchair experts have speculated that the Denver real estate "bubble" would burst. Everyone had a friend who had a friend who had an opinion about how "overheated" or "inflated" the Denver real estate market was. Sure, the average detached home price has more than doubled since 2013. If you bought a $345,000 home in Denver in August 2013, by August 2021, it was worth $700,000. But that was largely fueled by legitimate supply and demand issues, and so I always scoffed at these people.
As of this writing on Aug. 10, 2021, we are seeing a few indicators that the unprecedented growth in Denver home values may be slowing. Don't get your shopping bags ready or anything. There's no Macy's Black Friday sale around the corner. But there are some signs that Denver could be a bit less crazy than it has been.
More housing inventory
Real estate is no different than any other market. It's about supply and demand. Well, two things have happened the last two months that are leading to a higher supply of homes for sale in Denver.
First, the number of "active" listings at the end of the month has started to rise, according to the Denver Metro Association of Realtors. Think of "active" listings as the homes that were still sitting on the market at the end of the month. Active listings had taken a nose dive during Covid-19, but they rose from May to June this year and again from June to July and it now stands at 4,056.
Now, don't go thinking we're about to have a Macy's Black Friday sale on homes in Denver. For some context, we still had 37% fewer active listings in July 2021 than we did one year before. And for more context, a healthy "balanced" Denver real estate market has historically had about 14,000 active listings, so we're not exactly a mellow or sane market just yet. But it is on the rise.
And that leads me to the second positive point, which is that the number of "new" listings that came on the market is the highest it has been in a long time.
So more homes are coming on the market than before and more of those homes are staying on the market.
Demand is slipping ... a bit
The flip side to supply is demand, and the demand for Denver homes appears to have slipped in the last month, according to two metrics.
First, the number of sold homes was down 12% in July from June and was down 21% from this time last year. It's not a perfect indicator of demand, but when fewer homes are selling, we can infer that's because fewer buyers are in the market.
Second, the average number of showings on homes was down 33% in June from a high in April. So again, there appear to be fewer buyers out there looking.
So ... should I buy right now in Denver?
Actually, yes you should. An increasing supply and decreasing demand means fewer bidding wars, homes staying on market a wee bit longer and you as a buyer just having more options.
We've seen this with a few recent buyers having to compete against only a handful of other buyers instead of 10-20 other offers.
Are you going to get a deal? No. Supply is still historically low and demand is still high if you look at a longer history. Interest rates are still below 3%, which is giving cheap money to eager buyers.
And the slowdown could be temporary. It's quite possible that the increase in supply is coming from a backlog of sellers who wanted to sell a year ago but held off because they feared allowing strangers in their house during the Covid-19 pandemic. If that's the case, the backlog will fizzle at some point.
And the decrease in demand could easily be due to potential buyers focused on traveling for the first time in a year. If that's the case, and they rejoin the market come fall, then we're right back where we were a year ago.
But for now, we can enjoy a bit of relative peace.