Metro Denver’s housing market faced a second year of tough sledding in 2023, with both closings and the dollar value of transactions down by about 18% compared to 2022, according to the Denver Metro Association of Realtors.
Last year, the number of closings fell by 20.8%, but the value of transactions was down a smaller 12%, because of home prices rising in the first half of that year.
Despite the headwinds from much higher mortgage rates, which approached 8%, home prices didn’t drop as many buyers had hoped they would. That was because many sellers kept their homes off the market, reducing the supply.
“Last year, the Denver real estate market was challenging as we dealt with a lack of inventory and interest rates that seemed to go up daily,” said Libby Levinson-Katz, chairwoman of the DMAR Market Trends Committee and an area Realtor, in comments accompanying the monthly report.
The number of closings came in at 2,620 last month, down 7.7% from November and 9.31% from December 2022.
For all of 2023, there were only 41,840 sales, the fewest number since 2011, when housing markets were shaking off the hangover of a housing bubble and elevated foreclosures. Highlighting how weak 2023 was, there were 51,016 closings in 2022, 64,108 in 2021, and 63,516 in 2020.
Normally, higher financing costs and a big drop in sales would set the stage for prices to correct and create more affordability. But that didn’t happen in 2023.
The median price of a single-family home sold in December was $613,500, which was 2.1% below the $626,550 figure seen in November, but still up 2.25% from the $600,000 median sales price seen a year ago.
Condos and townhomes also defied expectations of a price decline in 2023, with the median sales price in December coming in at $418,701. That was up from November’s median closing price of $417,000 median price and up 2.46% from the $408,650 seen in December 2022.
The inventory of active listings at the end of December was 4,971, which was down 25.6% from the 6,684 available in November. Listings are up 4.5% from where they were in December 2022.
That big drop between November and December is higher than the average decline of 17% historically, but not completely out of line with the seasonal slowdown seen as the holidays approach. The bigger block to the market recovering equilibrium seems to be from a lack of enough new listings.
For all of 2023, sellers listed 49,560 homes and condos. In 2022, that number was 60,189 and in the heated market of 2021, it was 66,333. There were more than 71,000 back in 2019 before the pandemic.
Central bankers sharply cut interest rates to fend off a recession during the pandemic, setting off a refinancing boom. Homeowners sitting on a very low mortgage rate, many below 3%, have little to no incentives to escape those “golden handcuffs” unless they have to.
That has cut down on the number of listings and steered more buyers to purchase newly built homes instead of existing ones.
Buyer demand also dropped as mortgage rates kept rising, and that caused homes to take longer to sell. Back in 2021, homes flew into a buyer’s hands in a median of four days, and then five days in 2022. As of December, listings were taking a median of 29 days to go under contract.
Even though the number of homes sold reached a 12-year low, prices have risen so much this decade that the dollar value of sales last year nearly matched 2019 levels, which was $28.6 billion.
If mortgage rates continue to decline, home prices would likely take off again, Levinson-Katz predicted.
“There has been significant pent-up demand from both buyers and sellers over the last two years who have been interest rate adverse. If demand increases, this will ultimately provide some pressure on home prices,” she said.
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