Good news for buyers: Denver’s perpetually tight real estate market loosened up in June, according to a market trends report by the Denver Metro Association of Realtors.
Residential inventory in the Denver metro area increased nearly 20 percent in June compared with May. Though the added inventory could be a sign that the market is shifting to be more buyer-friendly, experts do not believe prices will drop quite yet.
“The rate of (price) growth is slowing,” said Steve Danyliw, chairman of the Denver Metro Association of Realtor’s market trends committee. “It’s not unexpected. The reality is that having double-digit growth is unsustainable.”
The inventory increase from May to June is significant, Danyliw said. Though the market typically experiences a boost during this time of year, the inventory increase normally is closer to 6 percent (though last year it was 24.4 percent). The jump can be attributed to increasing prices as fewer people are able to afford a home in the metro area, he said.
While overall inventory is increasing — it rose 3.87 percent from June 2016 — affordable housing is not. The largest gains contributing to the inventory jump are condominiums — compared with last year, there was a 22 percent increase in condo inventory, compared with a slight decrease of 0.72 percent in single-family home inventory.
Meanwhile, housing under $400,000 is selling fast, and the proportion of affordable homes has significantly decreased in recent years. According to the report, these homes made up 65 percent of the market in 2011, compared with 26 percent today.
“(The question is): What can the average home buyer truly afford, and can they afford these home prices?” Danyliw said. “I think (prices) will continue to creep upward. The affordability question is hard to answer.”
In June, the average single-family home in the metro area went for nearly half a million dollars — $498,792, and it was a 7 percent increase from a year ago.
“We still have amazing demand, but I don’t think we have the wages in the metro area to support these prices continuing to approach a half a million-dollar price point,” Danyliw said.
Overall, prices do seem to be slowing. Denver fell from the top of the Case-Shriller index in May, an indication of the fastest growing home prices in 20 major cities, and this month it did not come back. Previously, Denver held a position in the top three for over a year.
Danyliw said this is the first time since 2013 that he’s seen a market indication that growth will slow.
“It’s really going to hopefully create a balance that will favor buyers,” Danyliw said of the inventory indicator. “In the past three years we had fundamentally low inventory, and that’s been driving the extreme seller’s market.”
However, Danyliw said he and other experts in the field are not worried about a housing bubble. He said other economic indicators — such as distressed home sales and job growth — indicate the market is strong and that homeowners are financially stable. And, leading up to the housing market crash in 2008, it was a buyer’s market, not a seller’s.
“For something to really depress the housing market it would have to be something that we cannot predict, something that would be a shock to the whole economic system,” Danyliw said of his forecasts. “The underlying fundamentals are very strong.”