Home price growth in the Denver metro area accelerated over the past year, rising 21 percent, according to new data from S&P CoreLogic Case-Shiller Home Price Index.
“I think the re-acceleration in January might have been a result of anticipation of higher mortgage rates,” said Selma Hepp, deputy chief economist at S&P.
The Federal Reserve has raised interest rates to help cool the economy, and mortgage interest rates are at about 4.5 percent, up from less than 3.5 percent just a few months ago.
The S&P index allows comparison across 20 of the largest U.S. metro areas, and Denver had the 9th fastest home price growth over the year. Since June of 2021, Denver has surpassed the national rate of price growth.
It all is due to a gross imbalance of supply and demand.
A large cohort of millennial buyers started families and entered the housing market just as the pandemic caused many others to look for larger spaces which were now also their place of work.
Also, many people who already own are not putting their homes on the market.
“Selling their home now and buying something at a higher price at a higher mortgage rate doesn't make sense. The other thing is the elderly also decided to age in place more so than they did in the past,” Hepp said.
Inventory of active home listings in the Denver area has fallen more than 60 percent since the start of the pandemic, to record lows, according to data from Realtor.com.
“We are not just ending each month with low inventory, but we have had a lack of inventory enter the market throughout the year,” said Andrew Abrams, a Denver realtor.
Builders have lagged significantly behind population growth in the state. Colorado still hasn’t eclipsed the home building levels from before the Great Recession more than a decade ago, though there are signs that’s changing with home construction permits rising quickly in recent months. Metrostudy found a 22 percent increase in single-family home construction starting last year.
But don’t expect the new construction to make a big dent in prices, with so much demand.
The last time prices declined in the Denver area, on an annual basis, was in the Fall of 2011, according to S&P.
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