As Summer Heats Up, The Market Cools Off

The real estate market is finally starting to slow. Housing inventory in Metro Denver is increasing. The number of active listings at the end of May was up for the first time in recent memory, at a 7.9% increase from the May prior, jumping from 3,755 active listings to 4,051 active listings.



This rise in inventory is a sure sign that things are beginning to cool off and that the buyer pool has started to thin out. Some buyers have undoubtedly been priced out of the market, given high average home prices and mortgage interest rate hikes. Plus, high inflation for everyday items like gas and groceries adds up fast. This increase in inventory is much needed for the buyers still in the ring, who have suffered through some of the worst housing scarcity to date. Things should be a little less competitive right now than they have been over the past two years, and the days on market for listings is likely to increase over time.

On the flip side, sellers are still looking to capitalize on their equity and move or trade-up before interest rates get much higher. Some are getting a little panicky about a looming recession. For sellers who want to make a move right now: Remember, this is still a seller’s market. Buyers may be less willing to waive their concessions and offer crazy amounts over-asking price, but demand is still high for homes.

One crucial thing to note about these recent changes is that the increase in active housing inventory, the slowdown in home price appreciation, and the rise in interest rates are all factors that are likely bringing us closer to a more “normal” real estate market, not towards a housing crash.

Housing inventory was already historically low when the pandemic hit, then the move to remote work, desire for more indoor & outdoor space, etc., drove demand even higher. The net result was that historically low inventory, around 8,000 homes for sale in December 2019, was driven even lower. At times over the past couple of years, the inventory was as low as about 1,000-1,200 homes for sale at one time in the entire Denver metro!



In terms of price appreciation, having radical appreciation as we’ve seen over the past couple of years is not sustainable over the long term. The fact that price appreciation is starting to slow down but continuing to grow, is good for the balance of the local market. Plus, a recession doesn’t necessarily equal home price depreciation. Given genuine demand for homes and a scarcity of supply, slower-paced price appreciation is the most likely scenario for the foreseeable future.

Last, mortgage interest rates were also already at historic lows when the pandemic struck. Those too were driven even lower by the FED to combat inflation, to a record low in December 2020: 2.68%. Although rates have been on the rise lately, they are still on the low end, historically.



All these factors point to a real estate market that is simply slowing down from its fervent pace over the past two years. Please reach out if you have any questions! A market shift can be a big adjustment, but with the right plan, you can still work it to your advantage. Feel free to contact us if you are interested in making a move.