Central Denver home prices are leveling off as higher interest rates cool the market. The current 12-month rolling median price for a single-family home is $885,000:
Five significant factors are holding prices steady:
Although the number of available homes for sale is increasing, inventory levels are still low relative to buyer demand. Currently, we have about 55 days worth of inventory. A balanced market, where neither the buyer nor the seller has the upper hand, starts at around four months of supply.
Sellers are even less motivated than ever to sell their homes because they don’t want to exchange their 3% mortgage rate for a 7% mortgage rate on their replacement home and because there are few homes on the market from which to choose in the first place.
Those homeowners who have run into financial difficulties in this slowing economy probably have plenty of home equity and won’t be forced to sell. US owner’s aggregate housing wealth, the asset valuation minus the outstanding mortgage, is at an all-time high of $32.1 trillion, a gain of $8.5 trillion since the pandemic began, according to Lawrence Yun, the Chief Economist for the National Association of Realtors.
Central Denver offers few opportunities for homebuilders to provide additional inventory on the scale required to moderate prices. In addition, the average price of new construction homes sold in the past 12 months in central Denver hovers around $2.5 million. These new expensive homes create further upward median price pressure.
The entry of millennials (between 25 to 40 years old) into their prime home-buying years is fueling demand nationally, but especially here in Denver. According to a recent study by SmartAsset, Denver ranks second to Austin, Texas, as the city where millennials are most interested in moving:
Millennials have flocked to Denver, Colorado in recent years. In 2019, there was a net migration of more than 10,900 millennials to the city, according to our findings. Though falling slightly in 2021, the net migration number still ranks as second-highest in our study, at 9,216.
We expect home prices to stay relatively flat through the end of this year. This spring may bring continued but moderate price appreciation. Overall, we will see a lot less turnover in the market as homeowners stay put and first-time homebuyers are priced out of the market because of higher interest rates.