Metro Denver homebuyers were hit with a one-two punch of both higher mortgage rates and higher home prices last month, unexpected blows that could test their stamina in the weeks ahead, according to a monthly update from the Denver Metro Association of Realtors.
“Spring felt like a failure to launch, which has led to a summer kick-off where the natural rhythm of the Denver real estate market simply feels off,” said Libby Levinson-Katz, chairwoman of the DMAR Market Trends Committee, which compiled the report. “We thrive on predictability, and the current market feels uncertain.”
After three months of robust gains, home prices are again zooming toward last spring’s record highs, despite 30-year mortgage rates near the 7% mark, which isn’t too far from the highs reached last November. Rather than home prices softening in the face of higher rates as they did in the second half of last year, and which is the expected pattern, monthly price gains remained robust for the third month in a row.
The median price of a single-family home sold in metro Denver last month rose from $640,000 in April to $659,945 in May, a monthly gain of 3.12%. For condos and townhomes, the monthly median price went from $409,925 in April to $425,000 in May, an even stronger 3.7% monthly gain. Median prices are down only 1.2% from a year earlier for single-family and 1.5% for condos.
Why is that worrisome? Monthly median price appreciation has run above 3% in March, April and now May, way above the income gains that buyers have to cover the added costs. Add in higher mortgage rates and the affordability squeeze will push many would-be buyers out of the fight, although the debt ceiling agreement should relieve the upward pressure on rates.
Sellers put 5,180 new listings on the market last month, an 8.9% increase from the 4,758 listed in April, but down by 24% from the number of new listings in May 2022. At the end of the month, there were 5,228 active listings, an increase of 13.2% from April and 43.2% higher than a year earlier.
Despite that extra supply, the market remains way below the historical average for May of 14,895 listings. Listings sold in an average of 22 days compared to 28 in April, which is much more leisurely than the frenzied pace of 9 days averaged a year earlier.
The number of closings rose 6.7% last month to 4,167 as activity picked up, but they remain down 28.7% from a year ago. And the total sales volume last month was running at three-quarters of the pace seen this time last year.
“For a while now we have heard lots of talk about a ‘new normal’ in the housing market, but I am not sure what the new normal is,” said Nick DiPasquale, a Denver Realtor, in comments included with the report. “It is too early to tell if 2022 was an anomaly or a shift. What we do know is that overall, and compared to other markets around the country, Denver metro remains strong.”
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