It’s a statistic that, not long ago, homebuyers could have only dreamed of: The median price of a single-family home in the Denver area dropped by more than $90,000.
The drop from $660,000 in April to $569,800 this January represented the steepest, longest sustained decline in median sales price for single-family homes in the Denver metro area since the start of 2010. That’s according to the Colorado Association of Realtors, whose data goes back to that year.
Statewide, the decline in the median price of a single-family home from April to January also represented the steepest, longest sustained decline in that same period.
While that warrants some celebration, that downslide only erased 2022’s price increases — the steep hikes of 2020 and 2021 haven’t been wiped away, and housing affordability remains dismal in the metro area and around Colorado.
Cooper Thayer, a young Realtor in Douglas County, knows people his age can struggle to afford homes even with the right tools on their side.
“Last year, when I graduated college, I make a slightly-above-median income for my age, but I wouldn’t be able to afford a home in the next five years without external help,” said Thayer, 21, who was born and raised in Castle Rock.
Entry-level housing “just isn’t there” in the Denver metro area, especially in Douglas County, Thayer said.
“I think the lesson there is that even with good financial planning and budgeting and financial literacy, I’m just constrained by the high housing prices and the lack of inventory on the entry-level segment in Douglas County,” Thayer said.
After Colorado’s already-expensive housing market saw prices increase even more steeply during the economic trends of the coronavirus pandemic, the Federal Reserve’s raising of interest rates to battle inflation has pushed prices back down.
The Fed’s raising of rates is a significant — if not the primary — factor driving home prices lower, Thayer said.
Interest rates are the amount a lender charges a borrower for a loan, and when they change, it can affect mortgage rates but also car loans and credit card debt, which can dampen people’s ability to afford housing, Thayer noted.
If the Fed lowers interest rates later this year, it’s difficult to say whether home prices will shoot back up, erasing recent gains in affordability, Thayer said.
“Real estate can vary greatly quarter over quarter. I like to think of it more of a year-over-year trend,” Thayer said.
For example, if rates were to return to the level seen in December 2021, home prices in Douglas County in spring 2024 could come back to the highs of spring 2022, Thayer said.
A caveat, though, is the broader economic conditions that may arrive. If interest rates go down in response to an overall economic downturn, people might not be spending as much as they did in spring 2022, Thayer said.
“But we have such a constrained supply, (including) here in Douglas County,” that prices are also propped up by a lack of available homes, Thayer noted.
After a decade, some relief
Although the Denver area and Colorado as a whole have recently seen a big price drop, much of the downslide occurred during the fall and winter, when prices tend to drop each year as homebuying typically slows down after the usual price increases of summer or fall.
Comparing this January to last January, the drop in median price of a single-family home in metro Denver is more modest: a 1.4% decrease. Statewide, the median price was flat, a 0% change.
Still, even a slight decrease or flattening can come as a relief to Coloradans who have watched prices on a seemingly never-ending climb.
This January marked the first time in a decade that median sales price has not risen statewide January to January, year over year, according to the Realtor association.
The pattern was similar for the Denver metro area: This year saw the first January-to-January, year-over-year decrease since 2010 to 2011 — the earliest year in the data — when price ticked slightly up but stayed relatively flat.
Even amid the recent trends, Thayer says a big downward reset in housing prices isn’t for sure.
“On a scale compared to something like 2008? Probably not, because of the place the Denver metro area is in right now,” Thayer said. “It is certainly one of the most desirable places to live in the country … so the effects of a nationwide or global economic downturn are going to be lessened here because of that inherent supply constraint and that inherent (desire) to be here.”
Some type of downturn is likely imminent because the economy is cyclical, Thayer said. But he doesn’t foresee a drop in prices of 20% or more in the next 10 years in the Denver metro area relative to the rest of the world.
“I think a 10% drop over the next decade would be more feasible,” said Thayer, noting that even that is not necessarily likely.
What’s more, “it wouldn’t be permanent; it would be cyclical,” he noted.
Affordability an issue in Douglas
Douglas County’s housing affordability is low even compared to the rest of the region, with median housing prices around $100,000 higher than the average in the rest of the metro area, Thayer said.
“And while we do have higher income, the problem is for those service jobs and all those support roles,” Thayer said. He added: “There isn’t housing for entry-level jobs or younger people in the service workforce and in those kind of lower- to middle-income careers.”
He sees a “middle ground” in government policy that would incentivize entry-level housing, such as condos, townhomes and duplexes, so local residents can have a place to live where they work. He thinks that will take shape on the city and county level rather than statewide or nationally.
“As a Realtor, we certainly believe in homeownership in the U.S.,” Thayer said, “so providing homeownership opportunity not just to high-income households but also to the low- and medium-income households so they can build wealth.”