DENVER — 2022 represented a major shift in Denver’s real estate market.
The Colorado housing market had already been hot for several years prior to the pandemic. Then COVID-19 hit, and throughout the next two years, the market exploded as interest rates dropped, and buyers flooded the market.
But over the course of the last year, things have started to shift back toward something more closely resembling “normal".
“The difference between January and today is 'fast' and 'slow', said Andrew Abrams, of the Denver Metro Association of Realtors (DMAR).
DMAR releases monthly reports tracking trends in the market. In January 2022, with data representing the month prior (December 2021), DMAR found:
- Properties were spending less than 20 days on the market, on average (18)
- Inventory was low, with only 1477 properties on the market at the end of the month
- The median price of a detached (single family) home was $599,990
At that time, interest rates were much lower: between 3-3.5% on average. That made a difference.
“The rate at which interest rates increased has been a dramatic story for the year,” Abrams said. “And much more impactful than any year that I’ve ever worked.”
As rates climbed higher this year, the white-hot market started to shift. Suddenly sellers had to be more conservative when pricing their home, and many ultimately dropped their list price. Many buyers dropped out as higher rates pushed their budgets into unaffordable territory.
“With my clients, the highest [interest rate] we saw was around 7.5%. I had clients that were also earlier in the year looking at 3-3.5% [mortgage rates]. So a 4% gap between the highest and lowest was almost the different in 40% of a monthly payment which is really going to have a big impact on buyers,” Abrams said.
But for the sellers who remained in the market, they found themselves facing less competition. They were able to take more time with purchasing decisions, and ask for more concessions from a seller – including repairs following inspections.
“I think it’s that shift to a more normalized market,” Abrams said. “I think it’s a better balance between buyers and sellers, and I think that’s healthy.”
DMAR’s December report, which reflects data from November 2022, found:
- Properties were spending more time on the market, about 34 days on average
- Inventory has increased dramatically from this time last year, with 6,253 active listings at the end of the month
- The median price of a detached (single family) home was $615,000, an increase of about 2.5% from the start of the year
As we enter the final month of the year, interest rates remain above 6%, according to Mortgage News Daily. Abrams said the market usually slows down this time of year, a return to a seasonal trend that was upended the last few years by the pandemic.
“Not only are people not shopping, there’s just not as many homes hitting the market as in the [historical] past,” Abrams said.
“The incentive previously was to kind of catch that equity wave as things continue to go up. Now the incentive [to buy] is more situational or lifestyle. If you have an interest rate [currently] under 4%, which a lot of people do, you’re not necessarily moving to get a better interest rate, so the decision to move is really a lifestyle change.”
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