Higher interest rates, now solidly above 5% on a 30-year mortgage, likely helped slow home sales in metro Denver last month, and the number of listings available is surging. But when it comes to calming those gale-force gains in home prices, the windows are still rattling something fierce.
The number of residential properties available for sale shot up another 44.2% between March and April, following an 81% gain between March and February, according to a monthly update from the Denver Metro Association of Realtors, which covers an 11-county area. Normally, the gain in listings between March and April averages around 8.6%.
Sellers listed 2,445 single-family homes at the end of April, an increase of 50.3% from March and 49% from April 2021. Listings for condos and townhomes ended the month at 759, a 27.8% increase from March, but down 20.4% from a year earlier.
The number of new listings this year is running at about the same pace as seen in 2021 and 2020, and homeowners who locked in a mortgage rate in the 3% range may not be very motivated to swap that out for something above 5% unless they really have to. Inventory gains are coming from fewer sales. Those are down 11.9% year-over-year, even with a nearly 3% gain month-over-month.
Slower sales and more supply should dampen price gains, but that isn’t what is happening so far.
“While supply is on the rise, so are prices,” said Andrew Abrams, chairman of the DMAR Market Trends Committee, in the report. “The average price of a single-family detached home is $825,073, representing a 3.93% increase from the last month.”
Measured annually, average price gains for single-family homes are running at 18.5%. Now take April’s monthly gain and annualize that. Buyers would be facing average home prices 47% higher a year from now. It’s not sustainable and highly unlikely. Something will have to give.
More high-end homes listing and selling can skew the average sales price in any given month. But even the median price, or midpoint price, now sits at $684,550, reflecting a 3.7% monthly gain and a 17.6% annual gain. To afford that middle-of-the-road home, buyers would need to have an income of $162,111 a year, and that is assuming they can bring a 20% downpayment, according to a mortgage calculator.
Lou Barnes, a senior loan officer with Cherry Creek Mortgage in Boulder, said about two-thirds of the applications in the thick pile he is working through are coming from software engineers and other tech workers. The region has done well when it comes to attracting high-paying tech jobs. When it comes to building enough homes for those workers and everyone else, not so much.
“The housing market has gone up on a straw since COVID-19. It is pushing every limit that we know,” he said. “Markets that go vertical have a distressing probability of a retrace.”