The Denver housing market is in the midst of a housing high driven by strong population and job growth coupled with a low supply of residential properties to buy or rent.
Matt Holt
“It all starts with population growth,” said Matt Holt, who works for a Denver-based investment firm that buys non-performing loans and real estate across the country. “A lot of young people are moving here. They all move out for the lifestyle. They move out for the mountains, the skiing, the hiking.
“You get this young, highly educated pool of talent that is driving business here,” continued Holt, 32, who owns a home near downtown and bikes the three miles to work each day.
“We’ve had some large corporations move here. They are providing good jobs that pay well and help support the housing market, too.”
But the same forces that created the housing boom — growing demand and scarce supply — now threaten to hobble continued growth in the Denver residential real estate market, according to local experts.
“From a (sales) volume stand point it appears we may have peaked in 2015,” wrote Greg Smith, broker/owner at Re/Max Alliance in Boulder, in an email. “As a result of limited inventory, we are currently in a holding pattern.”
Pricing problematic for young and old
Ian Armstrong
The demand-supply imbalance has boosted home prices, raising them out of reach for many first-time homebuyers, according to Ian Armstrong, broker/owner at Armstrong Real Estate Services in Denver.
“I’m seeing a lot of first-time homebuyers; it’s just that I’m having a hard time finding something in their budget. They have to move further out away from the city,” he said.
Steffen Kaufman
The highly competitive market in the lower price ranges is also proving problematic for older homeowners looking to downsize, according to Steffen Kaufman, broker associate at Re/Max Professionals in Englewood.
“I have so many older clients who would move in a heartbeat if they could find what they are looking for, but they can’t,” he said. “I wish I could find product. I could probably make quite a few commissions. I have clients who have been looking for over a year who just can’t find what they are looking for.”
Peak prices, poor affordability
Median home prices in the 10-county Denver metropolitan statistical area hit an all-time high of $345,000 in June 2016, according to Attom Data Solutions. That was a whopping 49 percent above the city’s pre-recession high of $231,000 in June 2006.
The rapid rise in home prices has pushed affordability below historically normal levels in all five Denver counties covered by the Attom Affordability Index.
Chad Ochsner
“I do have a concern moving forward about affordability. We remain the most expensive non-coastal city except for Chicago. … That’s something we, collectively as a community, need to be aware of and address,” said Chad Ochsner, employing broker at Re/Max Alliance based in Arvada.
Sales volume slowing
In the meantime, the scarcity of supply and the resulting affordability challenges for buyers is finally showing up in the form of slowing home sales volume.
After 13 consecutive months of year-over-year increases, sales volume in the 10-county Denver metro area has now decreased on an annual basis for five consecutive months ending in July — when volume plummeted 17 percent from a year ago, according to Attom Data Solutions.
Tom Guest
“My suspicion is that August sales will be way down,” said Tom Guest, broker/owner at Key Masters Real Estate in Castle Rock. “I don’t think prices will be affected as much.… I think we’ll have another strong spring when people come back.”
Bridge loans for move-up buyers
Some prospective move-up buyers who are concerned about not being able to quickly secure their future home in the highly competitive Denver market are resorting to bridge loans, according to Ochsner.
These short-term loans allow homeowners to leverage their current property to make a competitive offer on their next home — either an all-cash offer or an offer with a beefy down payment. Once the new home is secured, the old home can be put on the market and sold to pay off the loan, according to Jodi Thomas, a president at FirstBank in Wheat Ridge.
“Bridge loans eliminate the timing pressures of having to sell the current home before buying the next,” wrote Thomas in an email response to questions. “Finding affordable homes in the Denver market can be difficult. …. Bridge loans, along with a strong pre-approval letter from a reputable lender, can help low- to moderate-income families get their offers accepted.”
Read the full story in the Attom Data Solutions Housing News Report.
Daren Blomquist is the senior vice president at Attom Data Solutions.