Home price gains in metro Denver are rising at a double-digit pace this year after taking a breather in 2017, pushing the average price of a single-family home sold in February above $500,000 for the first time, according to the Denver Metro Association of Realtors.
“We have never been above $500,000,” said Steve Danyliw, chairman of the DMAR market trends committee and a Denver Realtor. “It is a psychological barrier, especially for some of our younger buyers.”
The average price of a single-family home sold in metro Denver reached $502,986 in February, up 2.5 percent from January and 11.8 percent from February 2017.
By contrast, the income gains needed to support higher prices are running just under 3 percent in Colorado.
There were a few signs in the latest numbers, however, that the increases may not continue at such a blistering pace. Inventory has inched up as more new listings arrived and sales slowed, in part because of rising mortgage interest rates.
Average rates on a 30-year mortgage have moved from 3.9 percent at the start of the year to 4.43 percent as of March 1, according to a weekly survey from Freddie Mac.
A 0.5 percentage point move in mortgage rates adds $117 a month to the price of a $500,000 home with 20 percent down, Danyilw said. If rates go up a full percentage point, closer to 5 percent, then a buyer would be paying $237 a month more.
That rapid move in rates, however, didn’t dampen home price increases, probably because many buyers had locked in lower rates, something lenders will offer for 30 to 90 days out.
If those buyers don’t find a property before the rate lock expires, they will be pushed back into a market charging around 4.5 percent. In that regard, the housing market could be heating up before it cools down.
The inventory and sales numbers would seem to support that view. But a counter argument is that so few affordable homes are available, desperate buyers will keep pushing the market higher until they reach the point of financial exhaustion.
“Everyone is afraid if they don’t buy something now, next year it will be worse. That could be causing it, the sense that we need to buy now,” said Heather Dos Santos, a broker with Kidder Plus Real Estate who works in the northern metro market.
Dos Santos said she visited a home that listed in Westminster on Saturday for $259,000, a hard-to-find bargain nowadays. Although there was no formal open house, a steady stream of agents and buyers moved in and out on Saturday.
“It got out of control. Everybody had the lock box code. People were coming and going,” she said.
Her client, an investor, noticed costly foundation problems and passed. But by Monday, after about 45 viewings, a buyer had the home under contract.
The number of single-family homes available to buy at the end of February rose 6.8 percent from January to 3,015, while the inventory of condos for sale rose 2.3 percent to 1,069, according to the counts from DMAR.
Those increases reflect more new listings and a drop in sales. Sellers listed 4,638 homes in February, an increase of 10.9 percent from January. Normally, February sees a 6.8 percent jump in new listings from the prior month.
“These new listings may be ‘fence-sitters’ jumping in as concerns of increasing interest rates mount,” Danyliw said.
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The number of listings that sold last month is down 2.8 percent from January and 9.2 percent from February 2017.
Danyilw said the peak selling season, which starts this month and goes into June and July, should test whether the region’s housing market can maintain its momentum in the face of higher interest rates and higher prices.
“Realistically, the mortgage interest rate will start playing a heavier and heavier role as the spring and summer go on,” Danilyw predicted.
The average price isn’t the only price measure used by market watchers. In any given month, the mix of homes sold can skew the average price. Metro Denver saw 102 properties priced at $1 million or more sell in February versus only 65 in February of 2017, Danyilw said.
Real estate experts tend to prefer the median price, or the point where half the homes sold for more, and half for less. For homes and condos, that reached $400,000 in February, up 3.9 percent from January and 12 percent from a year earlier and also a record high.