Colorado’s housing prices cooled a bit this past month, but that is doing little to provide relief to younger buyers wanting a route into homeownership, according to a newly released report by the Colorado Association of Realtors.
The latest Market Trends Housing Report covering sales in June shows the median price of a single-family home in the Denver area at $630,000, off just a half percent from the May price and down just 2.5% from June 2022 — following a year when buyers have had to deal with much higher mortgage rates.
Despite the slightly lower prices, CAR’s Housing Affordability Index for the seven-county metro area registered its poorest readings ever, according to Matt Leprino, who tracks numbers for the association.
The index dropped over the month to a lowest-ever score of 48, indicating the least home purchasing power since CAR began tracking the metric in 2010. Lower scores mean less affordable — at a 100 score, a median income family would have exactly the income to qualify for a median-priced house, assuming a 20% down payment. A 48 score suggests a family has around half the income required.
Leprino explained that the index, which factors in numbers of values beside price, often ranged in the 70s and 80s before area prices soared during 2020 to 2022. Statewide affordability is currently indexed at 51, the second poorest since CAR began tracking.
However, lower mortgage rates could ease the pain later this year, according to Lawrence Yun, Chief Economist for the National Association of Realtors.
“Low inflation means low mortgage rates,” Yun said in a statement following the release of the newest consumer price index figures — up 3% from one year ago, a much slower rate of increase than has been the recent case.
“Decelerating consumer prices could steadily lift home sales and increase home production in a few months,” Yun continued. He added that he expects rent increases, still rising rapidly around the nation, to ease off as new apartment units come online here and nationally.
The new Colorado report shows a relatively small supply of home listings arriving to market, keeping prices at higher levels both statewide and in the Denver metro area. Only 5,306 single-family homes came available for sale last month in the Denver area, some 28.5% less than arrived a year ago when sales were already cooling down. Some 6,800 homes are currently on the market in the area — 18% less than were available to buyers a year ago.
Homes are waiting on the market a little longer before sale, allowing buyers better time to weigh their options, according to CAR’s Leprino. The Denver area single-family market has a 1.8-month supply at the current rate of absorption, 11% longer than a year ago, but well within range of what agents consider a seller’s market.
In like manner, fewer buyers are bidding for homes beyond the listed price, something that became the norm during the hot market during the pandemic.
“The over-asking price, bidding war mentality has turned to a list-price to sale-price ratio right at 100%,”Leprino said. “The asking price is the sale price.” While lower rates would be a welcome relief for buyers, some agents are already warning that with little inventory arriving any improvement in rates could drive the market back into bidding war territory.
“Now is the time to buy,” said Barb Ecker with Guide Real Estate, who reports to CAR on Jefferson County, where inventories of single-family homes have fallen 35% over the past year. “If buyers wait, they’re possibly going to run into multiple offers again.
”Ecker told The Denver Gazette she has been working with an Arvada couple who sold their smaller townhome a year ago close to the top of the market. But after viewing 25 houses with them, they haven’t been able to find the larger single-family home in Arvada that matches their budget expectations.
“Rates have been so low for so long,” said CAR’s Leprino. “Sellers out there may have a $500,000 house to sell but want to buy a $500,000 house someplace else. People are asking, ‘If the payments are going to be higher to get the same house, why would I move? I’ll remodel the kitchen’.
Both buyers and sellers could see better prospects with a drop in mortgage rates, Leprino noted.
“When rates go down, more people want to buy and sell.” He adds that the steadier pricing now should be viewed in light of the huge runups that have happened over the past few years.
“We had large increases for two summers,” he said. “There were several summer months where we saw ten percent increases, month-over-month.”
Statewide, median prices now have dropped even less than in the metro area, according to the report — off just over 1% year-over-year for single-family homes. In the mountain resort areas, some markets have seen larger drop-offs for single-family, while condos are increasing in price.
In Steamboat, Chris Paoli with The Group Real Estate said the town vividly illustrates the low inventory problem that sustains pricing.
“Summer is a strong time for demand, and there’s a huge amount of investment going into the base mountain that is definitely spurring demand,” he said.
CAR reports that median prices for single-family homes in Steamboat have increased from June 2022, up 1.5% since the first of the year.
Paoli said the lack of inventory is extra evident in a town with both a ski resort and a downtown restaurant scene thriving, but with very little new home construction.
“We haven’t had a significant new resort development in 12 years,” he told The Denver Gazette.
Meanwhile, Steamboat has implemented new, strict rules on short-term rentals — placing even more pressure on the home purchasing side.
Twenty miles west of town, new investment in Yampa Valley Regional Airport is widening a trend Paoli has seen over the past decade, luring high-rolling buyers arriving by private jets to compare Steamboat prices to what they see in Aspen or Jackson.
“It’s really opened up,” Paoli added. “When you combine the mountain experience with downtown, it’s checking the box for clientele who never considered Steamboat before.”
That buyer, he says, is willing to pay a premium for special properties.
“But the cost to build is so high that premiums are around the replacement cost (of existing homes),” he said. “And the timeline for going through the construction process pushes the demand over to the existing inventory.”
CAR’s Monthly Market Statistical Reports are based on data from Colorado Multiple Listing Services. Metrics don’t include for-sale-by-owner transactions or all new home construction. CAR represents 29,000 realtors statewide.
Source: Colorado housing prices cool slightly, lower rates on way? | Business | denvergazette.com
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