Surging mortgage rates sent metro Denver’s once hyperactive housing market into a state of suspended animation as the year came to an end, with sales plunging to their lowest levels in a decade and annual price gains for single-family homes, once in the 20% range, essentially flatlining.
How chilled is the market? The number of home and condo sales fell to 2,720 last month, a 43.1% decline from December 2021, according to a monthly update from the Denver Metro Association of Realtors. Despite a robust first half, 2022 ended with 50,743 closings in metro Denver, a fifth fewer than in 2021 and the slowest pace since 2012, when the housing market was shaking off the housing bust.
“The post-pandemic shift back to a more normalized market will take some time,” Amanda Snitker, a metro Denver Realtor and vice chair of the DMAR Market Trends Committee, said in comments accompanying the report. Surging mortgage rates, which went from just over 3% on a 30-year loan at the start of last year topped 7% in the fall and then settled back into the mid-6% range in December, explain much of the shift in the market.
The median price of a single-family home sold in December was $600,000, which was only $30 higher than the median sales price in December 2021. That 0.1% increase is way short of keeping up with the 6.9% annual rate of consumer inflation in the region in November. Condos and townhomes did better, with the median sales price rising 5.74% last year to $405,000.
Another sign of the lack of circulation in the market is the average of 43 days listings took to sell in December. That is up from 34 days in November and 18 a year earlier. Back in May listings were flying off the shelf, going under contract in an average of nine days. Measured at the median or midway point, it is taking a listing six times as long to sell as it did a year earlier.
The slower pace of closings pushed the overall sales volume for metro Denver down 12%, the first time that has happened since the housing crash in the ’00s. That might be enough evidence to argue metro Denver’s bubbly housing market has finally burst.
But a key component is still missing — a glut in inventory or the supply of homes available for sale.
There were 4,757 active listings on the market at the end of December, down nearly 24% from November’s 6,253 listings. That may seem extreme, but the typical drop between the two months is 21.4% as sellers go into holiday mode. Available listings are up 222% from a record low 1,277 listings in December 2021.
Yet, even with that gain, supply remains tight at around 40% of the historical average of 12,350 listings in December based on records going back to 1985. There were nearly twice as many homes on the market in 2007.
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Sellers aren’t dumping properties on the market as they did back in 2007 to 2009. New listings fell 35.2% between November and December and they are down 34.8% year-over-year.
Many owners are holding a 30-year mortgage rate of under 4%, reducing the incentive to sell and take on a higher-cost loan. Measured against pre-pandemic levels seen in December 2019, median home prices are still up sharply in metro Denver, about $150,000 on a single-family home. Aside from those unfortunate enough to buy at the market peak in the middle of last year, most owners are sitting on a thick cushion of equity.
Snitker argues that both sellers and buyers have slowed their pace of activity, waiting for the market to “normalize.” When that happens will depend on the direction and duration of higher mortgage rates. But right now, the trajectory of the housing market looks to be downward.
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