Business

Home Affordability in Denver and Colorado Getting Worse

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Denver7 via YouTube file photo
The real estate scenes in Denver and Colorado as a whole continue to send mixed signals. Earlier this month, the Denver Metro Association of Realtors highlighted data suggesting that the local market could plateau soon, even as the average price for a single-family detached home hit another record high. And now, a new report from the Colorado Association of Realtors cites rising inventory and more pricing flexibility — yet affordability figures have never been worse.

The association's Housing Affordability Index is described as "a measure of a region’s housing affordability based on interest rates, median sales price and median income by county." For Colorado, affordability for June, the most recent month for which figures are available, fell 2.7 percent from May and 19.8 percent from last year at this time. In the seven-county Denver metro area, the month-to-month tumble was 2.6 percent, with affordability since June 2020 down a staggering 21.4 percent.

In many ways, this trend seems to defy the law of supply and demand that usually drives home sales. During June, new listings in Denver hit 7,005, a 6 percent increase from twelve months earlier. Moreover, the number of houses under contract or with a sale pending dipped from 6,658 in June 2020 to 5,918 last month. Yet the average sale price, estimated by CAR at $702,760, represented a jump of more than 30 percent year over year, and buyers paid 105.4 percent of list price on average.

Here are the figures in major categories, including the Housing Affordability Index.

The scenario is much the same for housing statewide. New listings are up from June 2020 (11,384) to June 2021 (12,050), and the number of homes under contract or with a sale pending is down by 6.4 percent. But somehow, the average sale price hit $673,799, a 34 percent increase from a year earlier, and buyers paid 104.4 percent of list on average no matter where in the state they live.

The statewide digits are below.

Colorado Association of Realtors members are just as confused by what's going on as anyone else, as is clear from statements collected by the group.

"If you speak to your local realtor, you will hear that perhaps the frenzy is slowing," notes Sunny Banka, who works in the Aurora area. "It is hard to tell if that is the typical July slowdown or if the winds of the real estate market are changing.... We have watched the inventory increase over the past thirty days, but, even with the increase, active listings are still very low in the Aurora and Centennial markets. Depending on the location, prices are up 20 percent to 35 percent over last year at this time."

Ditto that for Boulder and Broomfield, where Kelly Moye works. "Listings are still down in each county and the number of sold listings is up, indicating the buyers gobble up any inventory we have quicker than we can replenish it," she admits. "Single-family homes are up 32 percent in Boulder County and 20 percent in Broomfield since the beginning of the year, leaving many buyers wondering if they will ever get in the market at this pace."

Still, Moye continues: "We are starting to see a slowdown in terms of showings and offers received, and we are actually seeing price reductions on homes that haven't sold. This is typical for July and into August, so the real question of whether the market is changing will be determined in the fall."

Meanwhile, prices are likely to strain the bank accounts of most Colorado home buyers. Click to read the Colorado Association of Realtors June 2021 market trends report.