Competition, Prices Up As Metro Denver Home Market Enters Selling Season

 

Posted by Damon L. Chavez on Thursday, April 7th, 2016 at 11:17am.

Apr 5, 2016 /  Denver Business Journal  - 

Strong demand for homes in metro Denver continued in March, further driving price increases and stiff competition between buyers.

The average price of a home in metro Denver, including both detached single-family houses and attached homes such as townhomes and condominiums, rose 9.8 percent year-over-year to $393,684 in March, according to the latest report from the Denver Metro Association of Realtors.

Taken separately, detached home prices increased 8 percent to $435,796 in March, while condo prices increased 11 percent to $287,249.

Active listings for attached and detached homes together in the metro area reached 4,482 in March, an increase of 9 percent over the same period last year, but continued high demand for homes absorbed most of the inventory, with 4,053 homes selling in the month.

Sellers are afraid to put their homes on the market because of how fast homes are selling, said Joshua Hunt, founder of residential real estate company Trelora. They don't want their homes to sell before they have somewhere else to move, and the majority of homeowners cannot sustain two homes at once, he added.

Low inventory is also causing increased competition between buyers, which is playing out in the usual ways — multiple offers and bidding wars — but also leading to cases of bidding far above asking price.

But it's important for buyers to remember their limits financially, Hunt said, and not overextend themselves buying a home that is beyond their means or one they'll have to sell after the market cools off, perhaps for less than they paid.

Just when the market will cool down is the big question in residential real estate right now, and it's not an easy question to answer.

Many in the industry think that 2016 will be a year of continued price growth, but at a slower rate than in 2015.

March data support that theory. According to DMAR data from March 2015, home prices on average posted a jump of 14.7 percent from the previous year, a 5 percent greater increase than this year's average price jump.

"We're reaching the physical limits of what the market is able to do," said Mark Cramer, broker with Kentwood Real Estate. "We can't continue to maintain a 13 percent to 15 percent increase."

The two-year increase from 2014 to 2016 works out to 26 percent, from $312,292 two years ago to $393,684 today, on average. That increase in average price continues to put pressure on buyers looking for a home in the sub-$300,000 range.

Homes priced from $200,000 to $299,999 have about two weeks' worth of inventory in metro Denver, according to DMAR, meaning that if all the homes in that range sold at the rate they did in March, they would all be sold in less than a month.

While this trend makes home buying difficult for the average buyer, it means that the luxury market, or homes priced at $1 million or more, has an opportunity for growth, Cramer said.

Average prices in the luxury bracket increased by 3.7 percent year-over-year in March from $1.47 million to $1.52 million.

Denver metro area home-price growth in February ranked high on theCoreLogic Home Price Index, which is compiled monthly using public records and real estate databases.

The metro area posted a home price appreciation of 11.4 percent according to Irvine, California-based CoreLogic's index. Statewide, CoreLogic (NYSE: CLGX) showed that Colorado's home prices appreciated 10.5 percent and that prices nationwide appreciated 6.8 percent.

"Home prices continue to rise across the U.S. with every state posting year-over-year gains during the last 12 months," said Anand Nallathambi, president and CEO of CoreLogic. "Improved economic conditions and tight inventories continue to drive exceptionally strong gains in many markets, especially for homes priced below $500,000."