Well, 2022 sure is off to an interesting start! The residential real estate market saw a lot of changes in 2021 and 2022 is looking like we will continue to see tight inventory and strong buyer demand. The 30-year mortgage interest rate has moved from 3.0% to 3.9% over the last 1.5 months in anticipation of the Federal Reserve increasing the interbank lending rate.
Let’s take a look at the latest market trends for the residential real estate market in Denver as by examining: Supply, Demand, Sales Prices, and Months of Inventory for February 2022.
Supply
New listings dropped to a new low compared to the last three years. February saw just 4,312. To put this into perspective, February 2021 had 4,789 and February 2020 had 5,322. This represents a (10 %) decline.
The Denver Metro market ended February 2022 with just 2,296 homes on the market! This is (39.1%) decrease YOY. Many were asking, can the inventory problem get any worse? The answer is yes! Ultimately, buyers have had fewer and fewer options for a long period of time leading buyers to pay higher and higher amounts for homes.
Detached single family construction starts are up 15.5% YOY. (The data lags by 1 month.)
All in all, supply for residential homes for sale is reaching even lower levels. Since it takes 3-4 years to go from raw dirt to a finished home in a subdivision, we aren’t able to build our way out of this problem. More sellers need to enter the market.
Demand
The volume of showings is a great leading indicator of real estate market demand.
Total showings for February were lower than 2021 but that might be because of a new showing service competing with ShowingTime. The number of showings per active listing reached a new high of 24.66! This is the strongest end to winter that we have seen yet.
We saw 4,092 properties go under contract in February 2022. This does represent a (9.3%) decline YOY, but I think this is because of the inventory problem not that demand is slowing.
The median days on market has dropped to 4 days. This means half of the homes that are listed sell within 4 days.
Increasing interest rates are likely to have an impact on demand because this has a direct impact on the monthly mortgage payments.
All in all, showings, contracts, closings, and the median days on market all indicate we are firmly in a seller’s market.
Sales Price
The median sales price for the entire market during February was $565,000. This includes detached homes, condos, and town homes. If we look just at detached homes, the median sales price was $631,000 compared to $526,000 in February 2021. This represents a whopping 20.0% YOY increase!
The average sales price for the market during February was $636,180. This is higher than the median due to high sales in the luxury market segment. When we focus on detached homes, the average is $734,194.
Months of Inventory
The months of inventory is still the best indicator to watch for market trends. A seller’s market has 0-3 months of inventory. A balanced market has 4-6 months of inventory, and 7+ months of inventory is a buyer’s market. In a seller’s market prices go up, and in a buyer’s market prices go down.
With 2,296 listings on the market and 3,316 closings, we have 2.9 weeks of inventory. Therefore, we are still in a seller’s market!
Final Thoughts
In summary, supply, demand, sales prices, and months of inventory are all worth tracking. Supply is still a problem for Denver Residential Real Estate, and we anticipate supply will continue to be low. Demand is strong as we look at showings, contracts, and closings, and we are closely monitoring interest rates. Lastly, with 2.9 weeks of inventory, home appreciation is likely to continue in 2022.
Here is a link to the full presentation: