In a report released by the Denver Metro Association of Realtors in early February, the imbalance in supply and demand has annual home appreciation well into the double-digit territory. In December the average price for a single family home skyrocketed over $600,000. And in January 2021, the average price rose again 2.9% to a record $629,159. Annual price appreciation is leaping toward 18.7%. But the price increase directly reflects the availability of homes to buy on the market.
For context, in January 2021 there was a 70% increase in homes sold worth $1 million or more, compared to January of 2020. And 45.5% fewer homes sold in the $300,000 area. With the $400,000 range seeing an 11.2% drop in homes sold.
The median price, being half the homes sold for more, and the other half for less, was $510,000 for single family homes. That’s an increase of 1.3% for January, and 10.9% year over year. The Metro Denver area has not started a year with a double-digit median price since January 2018.
While homes are seeing increases, condos and townhomes are also seeing increases. The average price is up 2.5% and the median is also up 2.7% on a monthly basis — 11.7% and 11.15% annually. Condos and townhomes closed at an average price of $397,792, and median closing sat at $339,000.
“As the shift of more space and low interest rates continues to drive demand, the months-end active inventory continues to sink to historic lows,” said Andrew Abrams, chairman of the DMAR Market Trend Committee and a local realtor.
In December of 2020 the number of active listings (2,541) reached an all time low, and in January 2021, that number continued to drop another 8.9% to 2,316 active listings. Compared to January 2020, January 2021 buyers had half as many options on the market to choose from, and when compared to the 1985 market average inventory, that’s 83% fewer options. That decline in inventory only reflects a portion of the drop in new listings, falling 14.5% for single family homes on the year, and 10.6% for condos. And though Abrams makes note that pending sales are standing firm and on par with year-ago levels, the percent of closings fell 42% from December to 3,015 properties, and are down 10.3% for the year.
The Federal Reserve lowered mortgage rates to give the economy another boost, and buyers are attempting to take advantage of these historic rates. But with a lack of options on the market, that may explain the drop in sales. “We think there could be some upward pressure on the rates,” said Ali Wolf, chief economist at Zonda. Wolf expects rates for a 30-year mortgage to run in the range of 2.9% to 3.4% throughout this year, which is higher than they were in late 2020. While this will make purchasing a home less affordable, she says it shouldn’t derail the market altogether.