Market Update - Spring 2024

The last two months have been pretty hectic at Cohesion Homes and I’ve fallen a little behind on blogging, so today I’m going to talk about the spring market and look at data for April, May, and June to date.

Inventory Goes Nuts

April and May saw huge growth in new listings, with May active listings up 43% over last year. Sellers are tired of sitting on the sidelines and some can only wait for interest rates to go down for so long before they need to move.

Below is a chart of active listings by month from 2020 - 2024 for January - May. As you can see, in May active listings spiked above pre-pandemic inventory levels at 10,918 listings on the market in the 11 Denver Metro area counties.

This is the highest number of listings on the market in a single month in the last 10 years. In June - September of 2019 we saw similar inventory levels but they peaked at 10,467 in 2019.

When I saw these numbers I thought they looked crazy. That much inventory would certainly mean that housing is less competitive than what we’ve been experiencing so I dug a little deeper. Those numbers include all active listings, attached and detached. The majority of our clients are looking for detached houses with at least 3 bedrooms and 2 bathrooms and it seems like any listing that hits that criteria that is nicely updated for less than $700k is gone in a flash.

It turns out a lot of this inventory is attached. When looking at just detached single family houses we had 7,560 active listings in May which is still a 38% increase over last year, but a good chunk of the listings on the market are attached. When looking at just detached properties the number of active listings is seasonally high and indicative of an early peak in the market, but not as striking as a 10-year high in inventory.

Retraction Phase

So, what happens when inventory increases like this? Typically the Denver market sees closed price increases month over month from January to June, but this year the influx of inventory in April and May paired with soft buyer demand due to the high costs of buying that caused the market to peak earlier than usual. Median sold price decreased month over month in May, down to $665k from $675k in April.

Usually we see Median prices decrease month-over-month beginning in July or August but this year the trend started earlier.

Concessions Become the Norm

Seller concessions for interest rate buydowns are still prevalent in this market, with a lot of listings that appear to be going above list price actually having seller concessions baked into the closed price.

Market Anecdotes

Buyers seem to think they have all the time in the world to make an offer on a property, which is true if the initial list price was too high and the listing needs a lot of work. However, properties priced below $650k for a detached house or $500k for attached are still moving relatively quickly if they are updated, in a desirable location, staged, and professionally cleaned.

I had some buyers come in from out of town over Memorial Day weekend which is usually a slow weekend for new listings and market activity in general and it was crazy! We saw other people out and about at multiple listings we were touring and by Sunday morning several of the properties on the docket already had multiple offers.

Average Days on Market for April and May of 2024 shift quite a bit by price point:

Will Rates Fall? Probably Not This Year

The big question on everyone’s mind is if rates will fall this year. Unfortunately for the housing market, the most recent jobs report came out and employment rates looked as strong as ever so many economists are now changing their outlook and saying that a rate cut in 2024 seems unlikely. The average mortgage rate for homeowners in Denver is 3.9% so well below current market rates. Most economists believe that if mortgage rates fall to 5.5% we will see another frenzy in the housing market, but rates this low are unlikely in the short and medium terms.

Local Topics

Governor Polis approved a bipartisan bill that will cut property taxes, saving the average homeowner around $550 annually and capping future tax increases at 5.5%.

Hail season has been crazy this year which is partially contributing to Colorado homeowners reporting 30% - 130% increases in their insurance premiums with some homeowners being informed that their policies won’t be removed. As climate change continues to wreak havoc on housing due to extreme weather some insurance providers are exiting the Colorado market entirely.

ADUs are gaining popularity as neighborhoods are becoming increasingly friendly to them, there is now a new loan program that allows for a home equity line of credit (HELOC) based on future value which will enable homeowners to build more ADUs.

Denver’s real estate market is normalizing after a crazy frenzied few years, but we continue to face persistent affordability challenges. Both buyers and sellers must be very serious about moving in order to participate in this market.