Gardner Report

Q4 2020 Colorado Real Estate Market Update

by Windermere Evergreen

by Matthew Gardner

The following analysis of the Metro Denver & Northern Colorado real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.

REGIONAL ECONOMIC OVERVIEW

The job recovery that appeared to be firmly in place in the summer has started to wane. Though Colorado has recovered more than 209,000 of the jobs lost due to COVID-19, employment levels remain almost 210,000 below the level seen last February. Even with employment growth stalling, the unemployment rate stands at a relatively respectable 6.4%, down from a peak of 12.2%. Regionally, unemployment levels range from a low of 5.4% in Boulder to a high of 6.9% in Greeley. Rising COVID-19 infection rates continue to impact the job recovery, and I do not see much in the way of palpable improvement until a vaccine becomes freely available, likely in the second half of this year.

COLORADO HOME SALES

❱ In the final quarter of 2020, 12,207 homes sold. This represents an increase of 21.8% compared to the fourth quarter of 2019, but 19% lower than in the third quarter. I am not concerned, though, because seasonal influences tend to impact sales in the winter.

❱ Sales rose in all markets other than El Paso compared to the fourth quarter of 2019. I believe sales are only limited by the number of homes on the market.

❱ Inventory levels remain well below what I would like to see. The average number of homes on the market in the fourth quarter was down 55% from the same period in 2019.

❱ Pending sales were 34% lower compared to the third quarter. Again, seasonality and a lack of homes to buy impact this figure. Pending sales are still 13% higher than a year ago.

Colorado Counties Graph

COLORADO HOME PRICES

Price appreciation in various Colorado counties.

❱ Home prices rose significantly in the fourth quarter, with the average price increasing 13.7% year-over-year to $532,492. Prices were up 1.8% compared to the third quarter of this year.

❱ Interest rates are unlikely to drop much further and this will lead price growth to slow as we move through 2021.

❱ Year-over-year, prices rose across all markets covered by this report, with significant appreciation in Clear Creek, Gilpin, Park, and El Paso counties. Every county but Arapahoe saw double-digit price gains.

❱ Affordability in many Colorado markets remains a concern as prices continue to rise at well-above-average rates. That said, I anticipate we will see price growth moderate in 2021.

A bar graph showing the annual change in home sale prices in various Colorado counties.

DAYS ON MARKET

❱ The average number of days it took to sell a home in the markets contained in this report dropped 15 days compared to the final quarter of 2019.

❱ The amount of time it took to sell a home dropped in every county contained in this report compared to the fourth quarter of 2019.

❱ It took an average of 26 days to sell a home in the region, down 3 days compared to the third quarter of 2020.

❱ The Colorado housing market continues to demonstrate solid demand, and buyers are clearly competitive as suggested by the short length of time it is taking to sell a home.

A bar graph showing the average days on market for homes in various Colorado counties

CONCLUSIONS

A speedometer graph indicating a seller's market in Colorado.

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Home sales and prices are significantly higher than a year ago, and demand for housing is very much in place. Naturally, this favors home sellers who are still in control of the market. I do expect to see some improvement in listing activity this year, which, in concert with modestly rising interest rates, will likely start to take some of the steam out of the market. However, any moderation in the market has yet to appear. Even given the possible headwinds mentioned above, I am moving the needle a little more in favor of sellers, as demand is likely to exceed supply for the time being.

ABOUT MATTHEW GARDNER

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Colorado Real Estate Market Update

by Windermere Evergreen

ECONOMIC OVERVIEW

Colorado’s economy picked up, adding 64,900 new non-agricultural jobs over the past 12 months — a growth rate of 2.4%. Over the past three months, the state added an impressive 28,300 new jobs.

In August, the state unemployment rate was 2.8%, down from 3.4% a year ago. Unemployment rates in all the counties contained in this report were lower than a year ago. It is fair to say that all markets are now at full employment.

HOME SALES

In the third quarter of 2019, 17,562 homes sold. This is an increase of 5.1% compared to the third quarter of 2018 but 1.6% lower than the second quarter (which can be attributed to seasonality). Pending sales — a sign of future closings —rose 9.7%, suggesting that closings in the final quarter of 2019 are likely to show further improvement.
Seven counties contained in this report saw sales growth, while four saw sales activity drop. I am not concerned about this because all the markets that experienced slowing are relatively small and, therefore, subject to significant swings.
I was pleased to see an ongoing increase in the number of homes for sale (+16.9%), which means home buyers have more choice and feel less urgency.
Inventory levels are moving higher, and demand for housing appears to be quite strong. As I predicted last quarter, home sales rose in the third quarter compared to a year ago.

HOME PRICES

Home prices continue to trend higher, with the average home price in the region rising 3.8% year-over-year to $477,776.
Interest rates are at very competitive levels and are likely to remain below 4% for the balance of the year. As a result, prices will continue to rise but at a more modest pace.
Appreciation was again strongest in Park County, where prices rose 7.8%. We also saw strong growth in Weld County, which rose 7.4%. Home prices dropped in Clear Creek County, but, as mentioned earlier, this is a small market so I don’t believe this is indicative of an ongoing trend.
Affordability remains an issue in many Colorado markets and this will act as a modest headwind to ongoing price growth.

DAYS ON MARKET

The average number of days it took to sell a home in the markets contained in this report rose seven days compared to the third quarter of 2018.
The amount of time it took to sell a home rose in all counties compared to the third quarter of 2018.
It took an average of 30 days to sell a home in the region — an increase of 1 day compared to the second quarter of this year.
The Colorado housing market is still performing well, and the modest increase in the length of time it took to sell a home is a function of greater choice in homes for sale and buyers taking a little longer to choose a home.

CONCLUSIONS

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

For the third quarter of 2019, I continue the trend I started last summer and have moved the needle a little more in favor of buyers. I continue to closely monitor listing activity to see if we get any major bumps above the traditional increase because that may further slow home price growth. However, the trend for 2019 will continue to be a move toward a more balanced market.

ABOUT MATTHEW GARDNER

Colorado Real Estate Market Update

by Windermere Evergreen

The following analysis of the Metro Denver & Northern Colorado real estate market (which now includes Clear Creek, Gilpin, and Park counties) is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.

ECONOMIC OVERVIEW

Colorado’s economy continues to grow with the addition of 45,900 new non-agricultural jobs over the past 12 months, which represents a growth rate of 1.7%. As I have stated in the last two Gardner Reports, we continue to see a modest slowdown in employment gains, but that is to be expected at this stage of the business cycle.

In May, the state unemployment rate was 3.2%, up from 3.1% a year ago. The increase in the rate is essentially due to labor force growth, which rose by over 55,700 people over the past year. On a seasonally adjusted basis, unemployment rates in all the markets contained in this report were lower than a year ago and are at full employment.

HOME SALES

In the second quarter of 2019, 17,853 homes sold. This is a drop of 1% compared to the second quarter of 2018 but a substantial 59.9% higher than the first quarter of this year. Pending sales — a sign of future closings — rose 5.8%, suggesting that closings in the third quarter are likely to show further improvement.
Half of the counties contained in this report saw sales growth, while the other half had fewer closings. Sales in the small Clear Creek County fell precipitously. However, it was only a drop of 20 sales.
The marginal drop in the number of sales compared to a year ago can be attributed to the ongoing increase in listing activity (+34.8%), which continues to give would-be home buyers more choice and less urgency.
Inventory levels continue to rise, but demand for housing appears to be ongoing. I am not concerned by the marginal year-over-year slowdown and anticipate that sales will rise again in the third quarter.

HOME PRICES

Home prices continue to trend higher, but the rate of growth has taken a pause, with the average home price in the region rising by just 2.3% year-over-year to $490,575.
The drop in interest rates this year has nudged more buyers off the fence and this can allow further price growth as we move through the year.
Appreciation was again strongest in Park County, where prices rose 6.1%. We also saw strong growth in Weld County, which rose by 6.1%. Home prices dropped in Clear Creek, Boulder, and Gilpin counties, but I do not see this as being indicative of a trend in these markets.
Affordability continues to be an issue in many Colorado markets and this may act as a modest headwind to ongoing price growth. However, some of the slowing may be offset by very favorable mortgage rates.

DAYS ON MARKET

The average number of days it took to sell a home in the markets contained in this report rose four days over the second quarter of 2018.
The amount of time it took to sell a home rose in all counties except Gilpin when compared to the second quarter of 2018.
It took an average of 29 days to sell a home in the region — a drop of 13 days compared to the first quarter of this year.
It is likely that the drop in time-on-market was a function of the emerging spring selling season as well as falling mortgage rates.

CONCLUSIONS

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

For the second quarter of 2019, I continue the trend I started last summer and have moved the needle a little more in favor of buyers. I continue to closely monitor listing activity to see if we get any major bumps above the traditional increase because that may further slow home price growth. However, the trend for 2019 will continue to be a move toward a more balanced market.

ABOUT MATTHEW GARDNER