Metro Denver Real Estate Market Update – 2022 End of Year Report

Our market update for the metro Denver area for 2022 is broken down into All Residential, as well as Luxury Residential stats and Our Top 10 Predictions for 2023.

Below are links to download our update, as well as a breakdown of the stats in more detail:

• Metro Denver Area Residential Market Update
• Metro Denver Area Residential Luxury Market Update
• Metro Denver Area Residential Market Update Detailed Stats

Metro Denver Area Residential Market Update

Let’s dive into the 2022 wrap up!

As we predicted last January, we saw two very different markets in 2022!

The first half had very low Inventory, very high demand, and low Mortgage Interest Rates! We felt a market tailwind that pushed prices up with extremely high demand, and multiple offer activity with an appreciation pace close to 20% annually! We predicted that inflation would change everything, and it did with the help of government involvement to fight inflation!

The Housing market went into recession mode about June 16, 2022 with interest rates rising quickly, inventory growing and buyer demand began to wane because affordability was hard to find. Housing was trying to figure out how to handle high prices and higher interest rates.

The headwinds came with full force the second half of the year, and the market ended the year with 21% fewer homes sold, and the average price for all residential homes for the year was $681,000 which is still remarkably 11.2% higher than the 2021 average. As we balance out the positives with the negatives, 2022 was actually still a decent year for housing!

Now, let’s talk about 2023 as it will be a year full of surprises, with challenges and hurdles to navigate!

The good news! At RE/MAX Professionals, we have the experience, wisdom and track record to be successful in this type of market! We have done this market before, and are fully prepared to assist with all your Real Estate needs and wants!

Metro Denver Area Luxury Market Update

The luxury market in real estate throughout metro Denver area in 2022 was somewhat a roller coaster just like the rest of the market, with a very aggressive market at the beginning of the year and by mid year we started seeing cooling of the market.

Days on the market have increased from December of 2021 by almost 20% to 43 days for single family homes. Instead of sales prices increasing, we have seen prices decline by 1.2% for the year for single family homes yet the total number of homes sold was up over the prior year by 7% for single family homes. It is important to note that the robust activity of the first half of the year carried this number throughout the year.

While the luxury buyer is somewhat concerned about interest rates, almost 40% of sales over $1M were cash purchases. Chances of selling a luxury home in the metro Denver market has declined to between 24% and 47% depending upon price point compared to numbers that were significantly higher in the first half of the year.

What does all of this point to for Sellers – make sure you are pricing your home correctly for the current market. Buyers are savvy and while they are willing to pay a solid price for an updated or new home they are not willing to any longer pay top dollar for homes needing improvements. Good homes priced right are selling.

There are also great opportunities for Buyers who are willing to do some improvements to a home as homes needing updating are in many cases experiencing price reductions. The current market is most like the market that we saw from 2013 through 2018 which were more balanced markets.

Our Top 10 Predictions for 2023

1. There is No Housing Bubble: The fundamentals of this market are very different from The Great Recession, and while we expect some year over year price declines in 2023, we don’t believe there will be a systemic drop in home values!
2. Inflation has seen its Peak: The rate of personal consumption over the last two years is unsustainable given the combination of a low personal saving rate and an elevated ratio of debt-to-personal disposable income among consumers. The worst should be behind us!
3. 2023 Market will be a Mirror Image of 2022: The first half of the year will have the greatest challenges, as prices remain flat or decline. Higher interest rates and affordability may pause affordability for buyers and hesitancy for Sellers to sell with their current lower mortgage rate. The second half of the year may see a substantial increase in activity!
4. Mortgage Rates Will Drop: As economic data is released this year, interest rates will be on a roller coaster for a while, but as we enter a mild recession rates will improve. Recessions are almost always good for lower interest rates and affordability. Real Estate is one of the most interest rate sensitive sectors of the economy.
5. Inventory Will Not Grow Significantly: Demographics of our population entering their prime home buying years will continue to drive demand, and seller hesitancy to list their homes along with builders under building for almost 15 years will keep Inventory at reasonable levels.
6. No Buyer’s Market, But a More Balanced Market: Historically, we have defined a buyer’s market as six months of inventory, but with the lower inventory and buyer demands over the past 10 years, the new definition is closer to 2-3 months of inventory. The market will be close to that in 2023, and that will create more balance for buyers and sellers.
7. Sellers must become more Realistic: The time of selling a homes as-is or just throwing a price out there and see what happens are over! Sellers will need to be much more realistic on pricing, and when possible make their homes as presentable and updated as possible. Listings that price correctly, and don’t have to reduce the price are selling in less than half the time of those that do.
8. New Construction Activity Will Not Increase: Permits for new home construction are down by over 17%, and builder sentiment or confidence is down 54 points. We will see more aggressive pricing and incentives from builders as they hate to sit on a finished home. May be some great buyer opportunities, especially the first half of the year!
9. Employment and The Labor Markets Can Change Everything: All of the recession flags are up right now signaling a recession in our future. This may be mild if the growth rate of inflation falls, but the key data line will be 2023 jobless claims. The critical level is over 300,000 on the four week moving average. Expect more layoffs in the coming months, and some iBuyer companies will close their doors in 2023!
10. Affordability Will Be The Biggest Issue: We will likely see price declines the first half of the year, but this will not be enough to make housing more affordable. If Interest rates remain above 6% in 2023 this will make it challenging for buyers, especially first time buyers as rents will begin to decline as well. We believe interest rates will drop into the mid 5% range, and possibly lower 5% if the recession takes hold and inflation slows down. This would help affordability tremendously, and we will see a mini boom of buyer activity the second half of the year!

We are excited to help our clients stay focused on their housing needs, wealth building and the long-term strategy in 2023!  Let’s buckle up for a fun ride!

Happy New Year!