While the financial markets continue to struggle with fears of the Coronavirus, real estate stayed strong in Metro Denver during the month of February. 5,122 new listings came on the market in February, up 5.56 percent from the month prior which saw a massive month-over-month increase. Home sales were up 3.16 percent in February so the month ended with only 4,835 active listings, down 2.15 percent from January and 19.64 percent year over year.
Despite being one of our snowiest Februarys on record, more homes came on the market, up 5.56 percent from the prior month. 7.08 percent more of homes went under contract and 3.16 percent more sold than in January.
Though February showed strong activity, a major concern was the continuing drop in the number of active listings at month-end. Fewer homes to choose from pushes prices up in a community that already has an affordability issue.
So where is the inventory?
Currently, 55.2 percent of all owner-occupied homes are owned by people age 50 or older. An increasing number of Baby Boomers are aging in place, unlike their parents who sold their homes to downsize or move ahead of retirement.
It’s not just Baby Boomers. Homeownership tenures have reached new highs at an average of 13 years - the highest average in 18 years!
Nationally, new construction just hit a 12 year high but only caters to the upper tier of housing, which leaves an estimated gap of 3.8 million homes needed to meet market demand across the United States. In Colorado, housing permits are down year-over-year as builders try to shift from large homes to smaller, more affordable homes, townhomes and condos.
The lack of inventory is creating appreciation. Metro Denver’s February year to date is already 6.25 percent and primed to continue, whereas median home prices in metro Denver increased only 2.46 percent in 2019. A recent CoreLogic report shows four percent year-over-year gains and homes reported by FHFA showed a 5.2 percent increase year over year.
Fed Cuts Rates
Last week, the Federal Reserve implemented an emergency rate cut of 0.5 percent. While not a direct correlation, changes to the federal fund rate do often influence long-term mortgage interest rates, as they move with long-term Treasury yields. As a result, experts expect to see lower mortgage rates. The 30-year fixed rate is currently hovering around 3.50 percent.
How Will Denver’s Housing Market React?
Denver will continue to see strong demand in the housing market, despite Coronavirus and recession fears. Colorado has the third strongest job market in the United States and will see an expected 5.8 million more people in 2020. According to Zillow, Denver is one of only three non-southern cities predicted to outperform in 2020.
Today’s market trends report substantiates the high-demand, low-supply theory with an average of 1.38 months of inventory, a decrease from 27 to 12 days for homes listed on the MLS, and an estimated 8.8 to 9.2 million first-time homebuyers coming expected to participate in the housing market.
Housing inventory will continue to be a challenge as home builders in Colorado simply cannot keep up with market demand, in addition to homeowners and Baby Boomers staying put.
How home buyers and sellers can limit their exposure
Ultimately, determined home buyers and sellers will find a way—it may just look a little different than before. For one, the days of lavish, party-atmosphere open houses with finger food or baked cookies may be over, at least for a while. Another way home buyers and sellers are limiting their exposure is by opting for virtual tours.
While it can't completely replace in-person showings, virtual tours can help give buyers a better understanding of a home without stepping foot in it. For those that are concerned about the virus, this allows them to make a more informed decision about the property and whether to get out and go see it.
Information and market stats provided by: RISMedia, Realtor.com, and DMAR.