Tight inventory defines Denver housing market in January

by | Feb 8, 2018 | Blog

Low housing supply continues to characterize the Denver housing market, according to the Denver Metro Association of Realtors’ (DMAR) January report.

“In January, homes under contract were almost the same number as new listings. This means that as fast as listings come on the market they are placed under contract,” said Steve Danyliw, chairman of the DMAR Market Trends Committee.

As reported by the association, residential inventory in January rose only .39% over December – to 3,869. The number represents a 3.01% drop from the previous January. “This establishes a record low for any January,” notes Danyliw.

Meanwhile, prices continue inching up. Last month, the average sold price of a residential home rose to $449,429, a 1.56% increase over December and an 11.84% increase over January of 2017.

What is fueling these conditions?

Colorado Public Radio recently examined the issue, noting that the low supply/high demand situation is caused by a stew of factors. “On the new home side,” CPR reports, “builders aren’t building enough homes. In 2017, metro area contractors started 11,958 new homes, up 7.5% over 2016, according to Metrostudy.

“That’s way below what homebuilders typically started in the years before the recession,” noted CPR. “Builders say that’s due to a lack of lots to build on, and a lack of qualified labor. There is new construction, but what is being built is expensive, above a price point where they can make money.”

Existing homes for sale are also scarce. CPR notes that at least one prominent housing economist believes investors who bought foreclosed homes during the recession are inexplicably holding onto those homes now, “even though prices have gone up so much in the last five years.”

Additionally, residents in the metro area are remaining in their homes “about twice as long as they used to”—or 8 years on average. “Instead of listing a home, many potential sellers are remodeling, to make them more age-friendly or sprucing them up to make it feel new.”

This has created a vicious circle: Possible sellers avoid listing their homes for fear they won’t find a replacement home; and the longer those people stay in their homes, the less inventory everyone can choose from.

The final factor cited by CPR is that Colorado’s population continues to grow. “The Denver-Boulder area is still booming: 318,634 people have moved here since 2010 and they’re competing for an ever-shrinking pool of affordable homes,” notes CPR.

While the rate of population growth has slowed in the past year, the influx of new residents remains an issue.

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