Let’s take a look at how easy it is to create a dramatic news headline. Below is a graph of average monthly single-family home prices in central Denver;
This graph’s variability from month to month is fodder for a sensational story. Here are a few example headlines that could have been written based on this data:
Home Prices Plummet 3% From Last Year – December 2022
Home Prices Appreciate 4% From Last Year – January 2023
Home Prices Surge 26% From Last Month – February 2023
Most real estate stories about Denver market prices come from statistics compiled by the Denver Metro Association of Realtors based on Multiple Listing Service (MLS) data. Unfortunately, that data is limited in value because it’s monthly data.
A better approach to understanding market prices is the rolling 12-month median price. A year of data instead of 30 days eliminates extreme variability and seasonality common to our market. Also, using the median instead of the average price moderates the extremes. Below is the 12-month rolling median price for the same period:
This graph accurately depicts our scorching market last spring followed by a slower summer and a flat fall. We are beginning to see the market heating up again, as the rolling 12-month median price jumped from $890,000 to $900,000 at the end of February. This data is clearly contradictory to the Denver Post’s recent headline, “Metro Denver housing market crosses firmly into Negative Territory in February” (March 3, 2023). Their headline isn’t wrong – they’re using accurate data – but we don’t feel it gives a clear picture of the market our sellers and buyers are experiencing.
The one disadvantage of the rolling 12-month median price is that it’s less likely to show a significant market correction early in the cycle, but the housing market isn’t like the stock market. It moves slower, it’s more heterogeneous and less transparent. Look at the two graphs, and it’s easy to see which approach provides a fair market overview, and which graph is primed for media-hype!