Re­cent 20 per­cent jump loosens often tight mar­ket

The Denver Post - - BUSINESS - By Erin Dou­glas

Good news for buy­ers: Den­ver’s per­pet­u­ally tight real es­tate mar­ket loos­ened up in June, ac­cord­ing to a mar­ket trends re­port by the Den­ver Metro As­so­ci­a­tion of Real­tors.

Res­i­den­tial in­ven­tory in the Den­ver metro area in­creased nearly 20 per­cent in June com­pared with May. Though the added in­ven­tory could be a sign that the mar­ket is shift­ing to be more buyer-friendly, ex­perts do not be­lieve prices will drop quite yet.

“The rate of (price) growth is slow­ing,” said Steve Danyliw, chair­man of the Den­ver Metro As­so­ci­a­tion of Real­tor’s mar­ket trends com­mit­tee. “It’s not un­ex­pected. The re­al­ity is that hav­ing dou­ble-digit growth is un­sus­tain­able.”

The in­ven­tory in­crease from May to June is sig­nif­i­cant, Danyliw said. Though the mar­ket typ­i­cally ex­pe­ri­ences a boost dur­ing this time of year, the in­ven­tory in­crease nor­mally is closer to 6 per­cent ( though last year it was 24.4 per­cent). The jump can be at­trib­uted to in­creas­ing prices as less and less peo­ple are able to af­ford a home in the metro area, he said.

While over­all in­ven­tory is in­creas­ing — it rose 3.87 per­cent from June 2016 — af­ford­able hous­ing is not. The largest gains con­tribut­ing to the in­ven­tory jump are con­do­mini­ums — com­pared with last year, there was a 22 per­cent in­crease in condo in­ven­tory, com­pared with a slight de­crease of 0.72 per­cent in sin­gle fam­ily home in­ven­tory.

Mean­while, hous­ing un­der $400,000 is sell­ing fast, and the pro­por­tion of af­ford­able homes has sig­nif­i­cantly de­creased in re­cent years. Ac­cord­ing to the re­port, th­ese homes made up 65 per­cent of the mar­ket in 2011, com­pared with 26 per­cent to­day.

“(The ques­tion is): What can the av­er­age home buyer truly af­ford, and can they af­ford th­ese home prices?” Danyliw said. “I think (prices) will con­tinue to creep up­ward. The af­ford­abil­ity ques­tion is hard to an­swer.”

In June, the av­er­age sin­gle-fam­ily home in the metro area went for nearly half a mil­lion dol­lars — $498,792, and it was a 7 per­cent in­crease from a year ago.

“We still have amaz­ing de­mand, but I don’t think we have the wages in the metro area to sup­port th­ese prices con­tin­u­ing to ap­proach a half a mil­lion-dol­lar price point,” Danyliw said.

Over­all, prices do seem to be slow­ing. Den­ver has lost ground in the Case-Shiller home price in­dex, which tracks changes in home prices in 20 ma­jor cities. Pre­vi­ously, Den­ver held a po­si­tion in the top three for more than a year, but in March and April dropped to fourth.

Danyliw said this is the first time since 2013 that he’s seen mar­ket in­di­ca­tion that growth will slow.

“It’s re­ally go­ing to hope­fully cre­ate bal­ance that will fa­vor buy­ers,” Danyliw said of the in­ven­tory in­di­ca­tor. “In the past three years we had fun­da­men­tally low in­ven­tory, and that’s been driv­ing the ex­treme seller’s mar­ket.”

How­ever, Danyliw said he and other ex­perts in the field are not wor­ried about a hous­ing bub­ble. He said other eco­nomic in­di­ca­tors — such as dis­tressed home sales and job growth — in­di­cate the mar­ket is strong and that home­own­ers are fi­nan­cially sta­ble. And, lead­ing up to the hous­ing mar­ket crash in 2008, it was a buyer’s mar­ket, not a seller’s.

“For some­thing to re­ally de­press the hous­ing mar­ket it would have to be some­thing that we can­not pre­dict, some­thing that would be a shock to the whole eco­nomic sys­tem,” Danyliw said of his fore­casts. “The un­der­ly­ing fun­da­men­tals are very strong.”

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