Buyers in metro Denver scrambled to grab a property last month before rising mortgage rates put a purchase out of reach, setting the stage for what could become another year of double-digit home price gains.
The median or mid-point price of a single-family sold in February was a record $635,000, up by $36,000 or 6% from January and 19.8% from a year earlier, according to a monthly update from the Denver Metro Association of Realtors. The gain in the median price of a condo sold was more subdued, rising 1.25% on the month to $405,000. That represents an increase of 19.6% on the year.
“With the continued demand and lack of inventory, prices will increase and lead to another year of double-digit appreciation,” predicted Andrew Abrams, chairman of the DMAR Market Trends Committee in comments included in the “Market Trends Report.”
February’s 6% monthly gain isn’t sustainable, given that it outpaces increases measured in entire years in more normal times. But nothing is normal about this market. There were only 1,226 homes and condos available for sale at the end of February, a fraction of the 13,220 homes and condos averaged for February going back to 1985. The inventory of listings was up 3.6% on the month, but down nearly 40% on the year.
Sellers listed 4,193 homes and condos on the market last month, an improvement from the 3,478 listed in January. Buyers closed on 3,202 homes and condos, while another 4,101 were pending or headed toward a sale.
Strong buying demand continued despite mortgage applications falling to lows not seen since December 2019. With 30-year mortgage rates topping 4% last month, a full percentage point above where rates were a year ago, more buyers are finding themselves priced out.
“In some markets in Colorado, we are truly unhealthy in terms of housing costs,” said Phyllis Resnick, executive director of the Colorado Futures Center at Colorado State University, who described the situation as “frothy.”
Russia’s invasion of Ukraine could complicate the interest rate picture, contributing to lower rates in the near term as people seek safe assets like U.S. Treasuries, but higher rates in the long term as more inflationary pressures are unleashed, especially in areas like food and energy.
“Constrained supply with insatiable demand is not a good mix. Russia could move us from going into a recession to a Stagflation economy — stagnating economic growth while pushing up the price of everything,” said Nicole Rueth, producing branch manager at The Rueth Team of Fairway Mortgage.
In a market where home prices are already high and rising rapidly, higher mortgage rates will only create more strain for first-time homebuyers, she said.
