What Is Going On With Denver Home Inventory and Prices

Over the last two years home buyers have been increasingly frustrated with the perception of high prices in our metro area marketplace. I am often asked why prices are rising so fast.

First, a little perspective will help. During the last “boom” in real estate, markets in Phoenix and Las Vegas were appreciating at a pace of 20 – 25%. In comparison, our market has been appreciating in the realm of 7 – 12% on a yearly basis since the market improved in 2012. This is very respectable and healthy growth.

Next, our market is really only experiencing the most significant gains in property values at the lower end of our market. Those properties priced under $400,000. While properties across the board are benefiting from our dynamics, it is those under $400,000 that are seeing the largest benefit.
So the drive behind rising prices is lack of inventory. This is especially true in the lower band of our market. For the last two years I have suggested price appreciation will not abate until we have new home construction that can adequately absorb some of the buyer demand in the resale marketplace, especially at price points of $300,000 to $450,000.

As reported today in the Denver Post, Metrostudy’s report of the Colorado region’s housing starts, indicates our market is hung up on its ability to deliver new homes. Weather has certainly played a part this year as well as an ongoing and unsupported lack of confidence with builders. When you look back at 2005 and the 20,000 home starts that year and compare with the predicted 9,000 home starts for 2015 you can begin to see how the perfect storm has lined up for rising prices and low inventory. You can also begin to appreciate the gap that needs to be addressed in our inventory when you couple that with the population growth the metro area has seen.

I fear for buyers they will continue to see rising home prices and stiff competition for properties in our lower band in the marketplace. As home prices continue to climb, I also expect more noticeable price increases will creep into the higher bands as the average price of a home continues to rise. The trigger, home inventory, will continue to play its role in the supply and demand see saw of home prices. More balance coming when new home construction can step up to the plate and off load some of the demand in the resale market.

The good news, it is still a great time to purchase a home and take advantage of the upswing in the market and cash in on the growing equity the Denver market is creating.

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