Metro Denver’s housing market has exited the pandemic-induced fever that dominated last year and the first half of this year — a surge in activity and prices unlike any the region has ever seen or will likely see for years to come. And within this hottest of hot markets, neighborhoods in Aurora, eastern Denver and central Jefferson County, ran hotter than others.

Record low inventories of homes on the market at the start of the year drove bidding wars and a huge surge in home prices as buyers tried to get ahead of rising interest rates. And while the market cooled as those higher mortgage rates dampened demand late spring and summer, the first half of 2022 will go down as one for the record books.

“Wages and salaries aren’t keeping pace with housing costs. It is realistically unsustainable. Something has to give at some point. Our housing market has changed, the question is how much will it continue to change,” said Steve Danyliw, a member of the Market Trends Committee at the Denver Metro Association of Realtors and a Littleton-based Realtor.

Danyliw regularly publishes home sales numbers on the 90 ZIPs that cover the 11-county area that DMAR defines as metro Denver. In any given period, a given neighborhood’s popularity will fluctuate depending on what buyers are looking for and where they are most active. But as the market starts to come down from its unsustainable run, it is worth knowing what areas have already started to brake hard and which are still accelerating, as warning signs flash slower speeds ahead.

Of the 90 ZIPS examined, 31 had a gain in the median sales price of homes of 20% or more in the first half of 2022 compared to the same period in 2021. That’s unprecedented. The biggest gain of 33.7% came in ZIP 80214, which covers northeast Lakewood. To the west, the Applewood, Cedar Crest and Heverly Heights neighborhoods, 80215, weren’t far behind with a gain of 32.4%. And the Indian Creek, Hampden and Cherry Creek Country Club neighborhoods, 80231, rose 27.9%.

But the number of sales in each of those areas fell, meaning a lack of supply contributed to those price gains. Only 23 of the 90 ZIPS in metro Denver managed to see more homes sold in the first half of this year than the first half of last year, an indicator of how little inventory there was. In February, a record low 1,226 homes and condos were available for sale in a region with nearly 3 million people. By June that supply had surged to more than 6,000 listings and in July the inventory was up to 7,361. And even that number is less than half the historical average.

A more comprehensive measure of a market’s heat is its ability to sustain strong price gains on an increasing number of sales. The ZIPs where closings accelerated the most included 80002, which covers Olde Town Arvada and surrounding areas, up nearly 51%; 80401, which covers Golden and Genesee, up 17.6%; and 80021, which covers western Westminster and Stanley Lake, up 15.7%.

A third way to measure the heat in a market is how quickly homes are selling once they are listed. For the first half of the year, there were six ZIPs where listings spent an average of six days on market before going under contract — 80011, 80249, 80013, 80235, 80030 and 80128. At the other extreme, listings in 80202, downtown Denver, took 41 days to sell on average and in 80135, which covers in Sedalia and Deckers, took 56 days.

One Denver ZIP, 80209 covering Washington Park and Belcaro, deserves special recognition as the first where the median, not average, sales price topped $1 million, Danyliw said. The median sales price went up 20.5%, from $850,000 in the first half of 2021 to $1.025 million in the first half of this year. More than half of the 290 homes sold from January to June went for above that elevated price more commonly seen in ski resort areas.

In trying to determine the hottest housing markets in the first half of 2022, The Denver Post looked at all three measures — how quickly homes sold, how much sales rose and how much sales prices increased — to create a combined rank score. Based on that, the hottest ZIP this year was 80011, which covers the neighborhoods to the north, south and west of the University of Colorado Anschutz Medical Campus in Aurora.

Up next was the 80014 ZIP that includes Heather Ridge, Heather Gardens and Meadow Hills, an area with a heavy presence of more affordable retirement condos. Median sales prices there were up 25.4% and the number of sales were up 5.8% with listings claimed in an average of eight days.

And the third spot went to 80247, which covers Green Valley Ranch, one of the few pockets in Denver County still seeing new home construction. Median sales prices there rose 20.4% to $513,000.

A hunt for affordability

A search for affordability was at play in many of the hottest neighborhoods this year as buyers tried to stay ahead of rising interest rates that reduced what they could qualify to purchase.

“Affordability was huge,” said Sunny Banka, a Realtor who has spent more than four decades helping clients buy and sell homes, primarily in Aurora and east Denver. The hottest ZIP, 80011, ranked as the 13th most affordable at $450,000, while the second hottest ZIP, 80014, ranked fifth most affordable. And while the median sales price crossed $500,000 to $513,000, the homes in that area are much newer and larger than those in older neighborhoods with lower price points.

Banka notes that a surge in inflation to 40-year highs may have motivated more buyers to try and find a place closer to work if they could. Rising rents in the area around the CU medical campus may have shifted the equation of renting versus owning for students with long residencies, which can stretch five years or more.

“It makes sense to be within walking distance or bus distance of where you work. People don’t want to spend hours on the roads and tons of money on gas,” she said.

Banka said she has made a specialty out of working with “frustrated landlords” who are nearing retirement or who have already moved out of state, closing on more than 30 sales of former investment properties. Those landlords have become more active.

“The words I kept hearing starting in March and April was that this is going to be the most we could get for the property. There was a sense that the market was at its peak,” Banka said.

That may explain why the 80011 ZIP, which includes the Jewell Heights and Peterson neighborhoods, was able to combine a 21.6% gain in median sales price with a 2.2% gain in the number of sales. And homes went under contract faster, within six days compared to nine in the first half of 2021.

As the medical campus is drawing more buyers to 80011, a boom in the construction of warehouses and distribution centers near the airport has boosted interest in the Green Valley Ranch area as a place to live, Banka said.

“It is more affordable and newer than a lot of parts of Denver, but it gets forgotten because we are so far northeast,” said Ashtree Brown, a broker with Rhino Realty Pros who specializes in the neighborhood. She said nearby highways provide easier access throughout the metro area and there is a sense of community in the area.

Brown said it became “heartbreaking” to work with buyers who were forced to waive contingencies and enter into bidding wars. Her job went from helping buyers find a “dream” home to finding a roof over their heads, any roof.

“When you are working you can’t make rent and you can’t buy a house, something has to give eventually,” she said.

Nancy Henson, the managing broker at Heather Gardens Brokers, has worked in the 80014 ZIP, which ranked second hottest overall, going back to the mid-1980s when she started in the real estate business with her father. She has seen a lot of ups and down over the past 36 years, but said nothing compares to the frenzy of the past two years.

“It was crazy. We had very little inventory and were getting record prices in just a few days,” she said. “Right now, it has come to a grinding slow-down, with price reductions every day on inventory that is not selling. It feels more like the 2006-2009 era, which makes me very nervous.”

In the spring and early summer, her firm had between 5 to10 listings on the market at any given time and now that total is up to 30 and they aren’t moving. Her hope is that interest rates don’t go so high they send the housing market into freefall.

Where things were not as hot

Only two markets experienced a decline in the median sales price in the first half of this year and those were 80237, which covers the north DTC area, down 7.6%, and 80220, which covers south Park Hill, Montclair, East Colfax, Hale and Mountclair neighborhoods. Prices there were down a tad, 0.9%.

On the combined rankings, the “coolest” market was 80303 in Boulder County, which includes the Arapahoe Ridge, Frasier Meadows and Meadow neighborhoods. But parts of that ZIP were in the path of the Marshall fire, which destroyed more than 1,000 homes at the start of the year and has disrupted sales in the area.

Deckers and Sedalia, 80135, and Evergreen, 80439, also came in near the bottom of the heat rankings. It is not unusual for higher-end areas to slow first when the market shifts, especially those on the periphery. When it comes to median prices, both those are near the top, with Deckers at $982,500 and Evergreen at $965,000.

Two signature Denver neighborhoods, Lowry, 80230, and downtown Denver, 80202, were also among the “softer” markets in 2022, ranking 88th and 86th respectively. But perspective is in order. Median prices were still rising and homes were selling faster than last year. And those two areas are mostly built out and lack new construction to push home sales higher.

“I’ve seen in the past that when this occurs, there is a plateau on ‘hotness’ because there isn’t a terribly large amount of competition in the areas,” said Matt Leprino, CEO of REMINGO, a brokerage in Denver. He added that interest rate hikes created an artificial and earlier-than-expected slowing of the usual seasonality.

“Numbers are lower and slower than in 2022 and 2021 but our data suggests that we are in a near identical year to 2019 — price increases notwithstanding. Growth in prices, however, as a percentage, nearly identical to 2019,” he said.

Banka said there were only 161 listings available in all of Aurora in January and as of Thursday that number was closer to 650. And while that increase might seem huge, it still represents a tight market.

“That is still an incredibly low inventory. As long as the jobs available are good, I don’t expect a downturn. We are just really short on housing,” she said.

A debate continues within the industry. Is the metro Denver housing market returning to normal, which feels like a big come down, even chilly, or has it started a new phase of slower sales and possibly falling prices that will push activity below normal, the freefall Benson worries about?

Rising rates are hurting every aspect of the housing market, from new home construction to remodels to home purchases, argue Alex Thomas and Devyn Bachman, researchers at John Burns Realty, in a note put out Friday.

“The extent of the impact on the broader economy remains to be seen, though the Fed’s reference to a “softish” landing for the economy suggests that there may be more pain on the way. What is clear, though, is that the boom times associated with cheap debt have come to an end,” they said.