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"Extreme Bidding Wars" Predicted for Denver House Hunters

This three-bedroom, three-bathroom home at 5756 Boston Street in the Central Park area is listed at $680,000, just below the average sale price for a detached house in metro Denver last month.
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This three-bedroom, three-bathroom home at 5756 Boston Street in the Central Park area is listed at $680,000, just below the average sale price for a detached house in metro Denver last month.
The average price of a detached home in metro Denver went down slightly last month, after a surprising jump in December 2021. But according to the latest report from the Denver Metro Association of Realtors, another decline will be ultra-unlikely in coming months. Because the number of homes available for sale in the area is at what's described as a "historic...low," DMAR predicts "the continuation of extreme bidding wars."

Demand continues to overwhelm supply in the local real estate market, as has been the case for more than a year. The number of new single-family, detached-home listings active at the end of January, the most recent month for which statistics are available, landed at just 788, an 18.60 percent slide from the 968 lingering at the close of December, and a 37.61 percent dip on a year-over-year basis.

This situation was even more unexpected because new listings actually rose from 1,779 in December to 2,378 in January, a spike of just over one-third. This data point indicates that more people were looking for homes than usual during the winter season, when such searches traditionally slow in Denver. Yet closed sales actually fell from 3,339 in December to 1,889 in January, a 43.43 percent drop.

A graphic from the report, which runs from January 2008 to January 2022, puts these factors in perspective. The yellow line corresponds to active listings at the end of each month, while the blue line shows sales that closed over the same periods:
The average price of a detached home in Denver surpassed $700,000 for the first time in May 2021, en route to a record-setting $728,385 in June. That was followed by a dip to a slightly lower plateau over the next four months: $687,176 in July, $685,832 in August, $688,629 in September and $684,700 in October. But in both November and December, the average broke the $700,000 barrier: The new survey adjusts the December average to $704,716.

In January, the average price for a single-family detached home went down 2.13 percent, to $689,711. The average closing price that month was 102.15 percent of list, however, compared to 101.66 percent in December. This suggests that even more homes are being bid up — a trend that Andrew Abrams, a local realtor and chair of the DMAR market trends committee, doesn't see ending anytime soon. Far from it.

"Based on the historic low inventory and current market demand, prices will likely skyrocket in the next three months," Abrams says. "With the low inventory and competition, we are expecting prices to greatly increase in the first half of this year."

While such a scenario may seem like a boon to sellers, Abrams offers a note of caution, saying that buyers are likely to "grow frustrated through the process, leading to potential burnout." But he thinks that realtors can help prevent budget-strained house hunters from simply giving up: "Creativity in writing offers has been instrumental for a successful outcome," he explains. "I want to emphasize that there are still diamonds in the rough."

Click to read the Denver Metro Association of Realtors' February 2022 market trends report.