The gurus at Colorado Home Realty speculated that 2017 would see home price increases move to a healthier, and more sustainable, rate in metro Denver. Data for the 3rd quarter of 2017 indicate this is happening.
The five-year period from the beginning of 2012 to the end of 2016 saw average annual home price appreciation of 10.05%, compounded annually. At the end of the 3rd quarter of this year, the rate has settled down to 6.83%. This is what we expected and it is welcome news.
We’ve seen this pattern before in metro Denver. Home prices soared at just over 10% per year from 1996 through 2000. That was not a bubble. It was followed by five years where the rate of growth cooled to 5% annually. We may be seeing a repeat of that performance.
One reason for the moderation of appreciation rates may be related to affordability. Two things are true about home affordability in the Denver area:
- Homes are less affordable now than they were in 2012 when this current run up in prices began. In 2012, the median family had 168% of the income needed to afford the payment on the median priced home. Now, the median family has 117% of the income needed for that median priced property … still affordable but less so than in 2012.
- Nevertheless, homes are more affordable now than they’ve been for 34 out of the last 43 years. It takes a smaller percentage of a median family’s income to make a house payment right now than it has for most of the last four decades.
Essentially, home prices went up by leaps and bounds starting in 2012 because 2012 was the absolute best affordability we’ve ever seen in the Denver area home market. The rate of increase then tends to moderate as the market gets back in balance where the monthly payment on a median priced home gets in sync with the payment that the median family income can support.
The move from double digit to single digit increases is also a sign that we are not in a bubble. When the bubble burst in 2008, it was proceeded by 18 months of moderate price declines of 2% per year followed by a 13% decline in value over the next 12 months. We aren’t seeing that pattern now.
The table below gives a summary of several market parameters for the 3rd quarter this year compared to the 3rd quarter of 2016. We saw almost 3% fewer closings in July through September this year compared to the same period a year ago. For 2017 as a whole, however, the number of homes changing hands are up by close to 4% since the first two quarters of the year saw more closing than the first half of 2016.
|Item||3rd Qtr 17||3rd Qtr 16||Change|
|Single Family (SF) Average Sale Price||$474,851||$446,403||UP 6.37%|
|Multi-Family (MF) Average Sale Price||$313.332||$285,095||UP 9.90%|
|Number of Properties Closed||14,516||14,924||DOWN 2.73%|
|Number Properties Available at End of Month||4,706||4,886||DOWN 3.68%|
|SF + MF 12-Month Rolling Average Sale Price*||$427,428||$400,099||UP 6.83%|
|SF + MF Number of Properties Closed over prior 12 months from end of the quarter*||53,015||51,121||UP 3.70%|
*12-month periods from October 1, 2016 ending September 30, 2017 and October 1, 2015 ending September 30, 2016, respectively.
Data analyzed by CHR and based in whole or in part on info from REColorado®, Inc. (RECI). RECI and CHR do not guarantee, and are not responsible for, its accuracy. RECI content may not reflect all real estate activity in the market. Not all properties were listed or sold by CHR. The stats above are for sales activity in Adams, Arapahoe, Broomfield, Denver, Douglas, Elbert and Jefferson counties. It includes home sales handled by real estate agents though Metrolist/REColorado®, Inc., the MLS system serving the metro Denver area.
You can see a more extensive breakout between the single family and multi-family segments of the market by clicking on the links at the end of this post. Be sure to take a peek.
If you like the look of those reports, we can produce one for you that is specific to your zip code and property type. The market is not uniform. Your part of town may be doing better or worse than the metro-wide averages.