Why Haven't Denver Home Prices Dropped More?

Nearly every metric in the December market-trends report from the Denver Metro Association of Realtors suggests that local home prices should be dropping. But a new survey reveals that both the average and median tags for a detached house in the Denver area have slipped by less than 1 percent from the previous month and remain above their level a year ago.

Once again, the market is defying gravity.

The average cost of a house in the metro area during November was calculated at $732,437, down just 0.58 percent from the adjusted October figure of $736,675. The median price dipped by only a little more: .092 percent, from the tweaked $620,700 in October to $615,000. And the average and median November prices are still 4.12 percent and 2.50 percent higher, respectively, than during the same month in 2021.

As DMAR market-trends committee chair and metro-area realtor Libby Levinson-Katz notes, interest rates have more than doubled since January, and their spike has definitely had an effect, as demonstrated by the three-bedroom, three-bathroom, 2,872-square-foot abode at 5435 North Uinta Way seen at the top of this post. The house, built in 2015 and located in the attractive Central Park neighborhood, wouldn't have lasted long had it been put on sale earlier this year, when demand was still piping hot. Instead, it debuted on the MLS (multiple-listings service) 34 days ago with a tag of $775,000, and it's still available, even though the price was lowered by $40,000 on December 1.

The DMAR survey focuses on an eleven-county zone that includes the core Denver metro counties as well as contiguous counties such as Gilpin, Clear Creek, Park and Elbert. Many of the November statistics follow historical trends that tend to kick in during autumn, but haven't always done so over the past couple of years. Take active listings, for example: The 4,572 recorded at month's end declined by 16.02 percent from the previous month but was a stunning 216.62 percent higher than in November 2021. However, the 1,862 new listings were much lower on a monthly and annual basis. And the 2,050 closed sales were down 17.10 percent from last month and 46.01 percent from last year.

The following graphic, which covers the period from January 2008 to October 2022, illustrates the changes. The yellow line represents active listings at the end of the month, and it descended below the blue line, which depicts closed listings at month's end, in July 2020 — and stayed beneath it for two years. Now, though, active listings are on top again.
The average cost of a detached home in Denver surpassed $700,000 for the first time in May 2021, en route to a record-setting $728,385 in June. That was followed by some back-and-forth slippage: $687,176 in July, $685,832 in August, $688,629 in September and $684,700 in October.

But in both November and December, the average again broke the $700,000 barrier, landing at $704,716 at the end of the year before descending to $688,127 in January 2022. This drop proved short-lived, however: The February 2022 average, adjusted to $738,472, was the highest ever recorded by the DMAR, and March hit $793,836. But April's $825,073 figure left that in the dust, and a dip in May to $803,835 was followed quickly by a hike of more than $3,000 in June, before lower prices in July, August, October and November, interrupted by a slight upswing in September.

Would-be buyers aren't having to move as quickly. The average length of time for listings to linger on the MLS hit 36 days in November, up from thirty the prior month and more than double the fifteen days of a year earlier. Likewise, the median stay on the MLS landed at 22 days, up from eighteen days in both September and October and more than four times longer than the five days registered in November 2021. Closing prices were 98.11 percent of list, down from 98.54 percent in October, suggesting that bidding wars are becoming rarer.

DMAR's Katz sees the current numbers as harbingers. "Without a doubt, the Denver metro housing market is changing," she acknowledges in a statement, "but the question on everyone’s mind is how long this change will last and what to expect next year. Most of the answers are tied directly to when we will see relief from increasing mortgage rates."

There's another factor, too: a scheduled bump in new conforming loan limits, which will increase from a baseline of $647,200 this year to $726,200 in 2023. The adjustment should make it easier for buyers to qualify for larger loans — and in Denver, where prices are stubbornly refusing to plunge, that's a good thing.

Click to read the Denver Metro Association of Realtors December 2022 market-trends report.