Denver Metro 6 County Inventory Count

Market Fun Facts (11/07/22): Welcome to the Fall selling season.  How will the market look this fall season? To answer this question NeXstep continues to monitor inventory levels across the 6 County Denver Metro. This month marks the first time in the last nine months that we have had a decrease in inventory; down -106 listing this month, for a total of 7,596 active homes for sale.  Have Inventory levels peaked for 2022?  Sales are down -387 properties from last month for a total of 3,457 sold homes in the past 30 days.  Another sign of change is found in our absorption rates.  Our average absorption rate increased by two weeks to 2.19 months.  For the fourth time this year we have all six counties over one month of supply.  Douglas county at 2.82 months leads all six counties while Broomfield is the lowest at 1.89 months.  Denver County leads with the way with 1,693 active listings and Broomfield County continues to have the fewest listings at 208.  Current publications indicate a balanced real estate market would need a minimum of 18,000 listings.  Thinking about selling…let’s talk!

What do these numbers mean? To help understand what these numbers mean to our local markets we are now including the number of sold comps during the past 30 days or 1 month.  Looking at our sold numbers over the past month allows us to calculate a monthly absorption rate.  An absorption rate tells us how many months it would take to sell off our entire inventory should we have no new listings.  A balanced market is considered 6 months.

County Sold Active Absorption Rate
Adams 628 1491 2.37
Arapahoe 771 1517 1.97
Broomfield 110 208 1.89
Denver 798 1693 2.12
Douglas 505 1425 2.82
Jefferson 645 1262 1.96
Total 3,457 7,596 2.19

Talking Points For September 2022

Special thanks to Megan Aller at First American Title for the following Market Summary:

Cooler Weather and Cooling Markets

October’s cooling trend continued to settle in as the weather cooled in Metro Denver. After the spring run up we are now seeing pull back further than anticipated seasonal norms. From 2013-2019 Metro Denver has had a very predictable and seasonal flow to it’s real estate market rhythm. When COVID settled in, driving inventory low and interest rates even lower homeowners enjoyed a 26% appreciation rate between 2020 and 2021 alone. As interest rates climbed beginning in 2023 affordability took major hits causing a correction to take place more than seasonal norms. As of now, Metro Denver is still up 12.7% through the end of Q3 over 2022 even after average home prices have fallen back nearly 10% from the peak closing month of May 2022. We had room for correction, and the last 2 years have not been sustainable.

I want to talk about some affordability trends we have seen in the past as it relates to appreciation, interest rates and the percentage of household income it takes each month to make a principal and interest payment on a median priced home. Historically over the last 15 years when the percentage of P&I payments hit 30-35% of a median household income in the following year we see appreciation fall into negative numbers due to affordability. Based on a median price of $625,000 for 10% down on a 30 year fixed loan at 6.90% interest that makes for a P&I payment of $4,432 which grew by 7.9% from last month and is up 67.8% from the same month one year ago. This payment represents 50.9% of the average household income in Metro Denver. With these numbers so extreme I’m not shocked to see more frequent and larger price reductions across the board. This is a check we needed to get back to a more sustainable rate of appreciation.

As long as interest rates remain high, I expect appreciation numbers to lag further and correct our unsustainable prices.

Even with this market correction taking place numbers are back on pace closer to the real estate cycles pre-COVID from 2013-2019, we are not that far off track from normal seasonal cycles excluding 2020, 2021 and the beginning of 2022. October 2022 rounded out with an average sold price of $739,296 for detached single family and $434,444 for attached single family. Price reductions for closed transactions were 48.5% for detached single family homes and 34.4% for attached single family homes. A detached single family home price reduction average was 7.0% and for attached single family home it was -5.5% from the original price. There are still some spots hotter in Metro Denver than others as 22.7% of all homes closed in the month of October still sold for over asking price.

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