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According to Case-Shiller’s US Home price index, prices have climbed over 4% (YTD) nationally. The two top cities west of the Mississippi were Las Vegas at 9.7% (year-over-year) and Phoenix at 6.7%; keeping in mind both cities were hit the hardest during the 2008-11 recession. Regional patterns are shifting even in the California markets. Los Angeles, San Francisco and San Diego still have higher values over the last year, however, those increases are taking place at much slower rates.
In early May, Care Logics home price index projected that the average home price is likely to rise 4.8% in 2019 nationally. In the Denver area, there is a foundation built that will allow the economy to continue improving while the housing market will benefit, potentially seeing 5.5-7% annual price appreciation. In the past two-to-three years, these appreciation values have been “price range” sensitive. The lower-to-mid price levels (primarily under $600k) have increased at, or above, the average. In the mid-to-upper price ranges ($600k to +/- $1 million), annual appreciation would be at the annual average and then trend below the average as the properties become more expensive. The luxury market (over $1.5 million) experiences anywhere from .5 to 3% annual increases, however, the number of sales was up a surprising 30% over the prior year in luxury homes.
According to Megan Aller of First American Title, there were a few interesting statistics for the month of April:
- Inventory of detached single-family (DSF) homes in the Denver area dropped below 4,000 units, leading to a 4.8% drop in sales from April 2018.
- April’s average price came in at a (record) high of $540,857 for DSF homes.
- For that average home price, sellers were getting 98.8% of their original ask price. In the higher priced (luxury) levels, the sellers were receiving 91%-96% of the original asking price, and of course, will generally take longer to sell.
- Over the last several years (since 2013), June has reported the highest sales price for each annual cycle.
The National Association of Realtors (NAR) just reported that pending home sales (under contract but not closed) were up 3.8% coming into late spring. That index was still down 1.2% (year-over-year), which is a reflection of lower interest rates and an uptick of inventory nationwide. Mortgage applications have steadily increased as mortgage rates are temporarily quite favorable.
When interest rates are rising, current homeowners who have low rates may be reluctant to sell and give up their good rates. Now that the Federal Reserve pulled back on rate increases, those homeowners are now able to become sellers and not sacrifice on the cost of borrowing money.
The real estate and construction industries are recognizing an emerging multi-generation housing trend that can better accommodate homes for extended families. Data from Pew Research shows that in 1950, 20% of America lived in a multi-generational home. Over the next 30 years, that figure bottomed out to 12% in 1980. Since then, the number of Americans wanting or needing to accommodate family members has been rising (hitting 20% in 2016) with more families adding on space, converting current spaces, redesigning basements for aging parents, and accommodating children a little longer.
With inventory beginning to increase, homes are staying on the market a little longer and there are more homes ultimately selling for under the original ask price; don’t expect to see any drastic drops in price in the coming years.
“While things shift in favor of buyers, Denver is still a hot housing market,” said Cheryl Young, senior economist at Trulia. Young said, “Sellers aren’t commanding prices.”
This is a healthy market where if the seller is rationally priced, the buyer will pay that price.
Regarding our Mile High city, US News and World Reports (after analyzing 125 Metro Areas, along with data from the Census Bureau and the KBI) moved Denver up to #2 in the list of 2019 top places to live.