Where Did the Under $500,000 Homes Go? | Guest Post
The July DMAR Market Trends data was released this week, and there are two notable trends. First, when comparing 2021 to pre-covid 2019, our seasonality is falling back into normal ranges. We have a healthy influx of listings up 8 percent, 2 percent more homes went under contract and there were 7.5 percent more closings, yet we continue to see three times the price growth.
If I return to our current month-over-month or year-over-year and stop there, we are bleeding red. But the real story is in the green. Active inventory is up 30 percent (29.92 percent) month-over-month to 4,056 homes for sale, up from 3,122 last month and a historic low of 1,921 just a few months ago in April.
Denver’s 3.3 million humans need more than 2, 3 or 4 thousand homes for sale to satisfy the demand. It’s that simple. Especially when strong demographics intersect with historically low mortgage rates and increasingly high market liquidity, people not only want to buy, they have the means to buy. Yet, strong demand is being held back by increased prices and constricted supply across all industries impacted by labor shortages, lack of raw materials and trade restrictions. Housing is undoubtedly not exempt from these limiting factors.
Green month-over-month active listings are eluding to hope that more balance is on its way, yet green double-digit annual closed prices say that balance may not arrive too quickly. The 11 county area experienced an annual increase in average closed prices of 16.4 percent to $624,903 and an increase in median closed prices of 17.39 percent to $540,000. CoreLogic, a national data aggregator, has Denver increasing 17.4 percent in real home price appreciation, leading all states in recapturing and exceeding home prices from the housing boom peak. Denver is now 94 percent above its home value peak in 2007.
The second trend that stuck out is that year-to-date, homes priced over $500,000 are flying off the shelves compared to 2020 and 2019, with more homes at higher prices coming on the market, going under contract, and closing. So far this year, 108 percent more homes over a million dollars have closed compared to the same period in 2020; 81 percent more homes closed between $750,000 and a million, and 44 percent more homes closed between $500,000 and $750,000. 46 percent of all homes sold this year-to-date were below $500,000. Yet only 26 percent of the buyers who closed in July did so for under $500,000. The active and pending listings for the lower price points were down too. In fact, year-to-date closings are down 19.63 percent, pendings are 13.35 percent lower and new listings are down 18.33 percent.
The under half a million dollar buyer is struggling to find a property in Denver. I’m probably not telling you anything you don’t know. Would it help to know Colorado is not on the top 10 most expensive states to live in? Places like California, New York and Hawaii make up the top three. Coastal state homeowners and investors will continue to see Denver as affordable, pushing prices up and challenging our first-time and entry-level homebuyers.
As for the economy, at some point, the Fed will stop buying mortgage-backed securities. People will go back to work loosening supply constraints. The price of goods will soften, and interest rates will increase. Until then, these incredibly and historically low interest rates are taking a little bit of the edge off. We have to be the loudspeaker for our buyers and sellers to take advantage of these low rates, like a gift, because the cost of waiting will be painful... especially for our first-time homebuyers seeking homes under the vanishing $500,000 price point.
That’s a wrap for this month’s Market Trends Update. It’s my pleasure to keep you updated,
Nicole Rueth of The Rueth Team of Fairway Mortgage
The views, opinions and positions expressed within this guest post are those of the author alone and do not necessarily represent those of the Denver Metro Association of REALTORS®. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.
If you are interested in submitting a guest post, please contact Sarah at sgoode@dmarealtors.com.
