Foothills' Housing Compared To Denver
Real estate, like politics, is local. Denver’s housing market is much larger than the foothills, by a factor of over 30--meaning there are over 30 times as many homes on the market and over 30 times as many home sales--so Denver is the dog that wags the foothills’ tail. But there ARE differences and it is interesting to see just how.
The most significant difference is the average home value. At the end of 2019, the average selling price of a home in metro Denver was $464,713, up 3.4% from 2018. By contrast, the average foothills home sold for $620,565, up 3.2% from 2018. While homes grew in value at about the same rate, foothills homes are over $150,000 more ‘valuable’ than Denver’s.
Listings & sales
Last year, 57,192 homes came to the market in metro Denver and 48,004 of them sold (for a ‘success’ rate of 84%). During the same year, 1802 homes came to the market in the foothills and 1485 of them sold (for a ‘success’ rate of 82%). The 2019 inventory of homes in Denver grew by under 4% from the year before, while the 2019 inventory of homes in the foothills grew by over 13% from the year before, suggesting that our market was more sluggish. As would be expected from the these figures, the number of Denver sales in 2019 was 11% higher than in 2018, while the number of foothills sales was up by only 5% over 2018.
So if the foothills had more supply and less demand for housing, why did our average selling price grow the same as Denver’s? The answer lies in the fact that we have very few low-price starter homes or condominiums--the hottest spot in the market--compared to Denver. And our high-end market--homes over $2million--is not as active as Denver’s. But our mid-market homes--from $300,000 to $700,000--come to the market and sell briskly, resulting in robust overall price appreciation that matches Denver’s.
Housing markets are universally ranked by how home sales compare to home inventory, known as the ‘absorption rate’. If there are 1-3 months of standing inventory in a community, it’s considered a Sellers’ Market, 4-6 months of standing inventory is a Balanced Market, and over 6 months of inventory indicates a Buyers’ Market. Both Denver and the foothills ended 2019 with 2 months of standing inventory, indicating both markets continue to flourish.
Mortgage rates have surprised analysts by how low they fell in 2019. When recently polled, all 13 governors on the Fed’s board predicted that rates would remain the same or even fall slightly during 2020. If they are right, homes should be affordable and housing should perform well during the upcoming year.
Top 10 lists
Denver appeared on ‘top 10 cities’ lists throughout the last decade: top 10 in price appreciation, top 10 hottest destinations, top 10 in salary growth and more. It is now falling off those top 10 lists, which is good. Leading the country in statistics connotes feverish activity, which translates to an imbalanced market. As Denver’s market moderates, home values should rise gently upward further & longer. It also gives Denver leaders some breathing room to tackle issues like traffic congestion and homelessness.
2020 promises to be a just-right porridge year, perhaps not hot enough for sellers who missed the frenzy of the last decade or cool enough for buyers eager for prices to stop rising. But it should be a good year for sellers and buyers to find a fair transaction price. There’s a lot to be said for that.