According to a recent article in the Denver Post, the scarcity of homes for sale in the Denver metro area has left buyers frustrated, frenzied and desperate. December’s total inventory of homes for sale was below 5,000; January ended with just 4,171 homes for sale—barely a quarter of the 12-year average. Imagine if we had only a quarter of our normal snowpack. That seems to be the kind of drought that has gripped the local housing market.
Surprisingly, current mortgage rates below 4 percent for a 30-year fixed have not had an impact. The last time rates were this low, in 2013, metro Denver saw a spike in buyers competing for limited inventory. Conventional wisdom at the time was that supply would increase as home prices rose, but it hasn’t worked out that way. Today’s prices are higher than 2013, but inventory is even tighter.
Metro buyers are in uncharted territory. In years past, the winter months typically saw a build-up of inventory ahead of the active spring season. Mid-winter shoppers could take their time and evaluate homes at a leisurely pace. But this winter, available inventory is moving fast, especially for homes priced below $300,000. In many cases buyers are bidding above list price, putting up more cash, skipping contingencies and foregoing repairs.
Some factors might change the dynamic in the months and years ahead: Interest rates could rise, removing buyers from the market. Population growth might level off due to a lack of affordable homes. Builders might shift from high-end homes to entry-level homes, increasing supply.
In reality, though, the gap between supply and demand will be around for some time. Inventory may not be growing, but a sense of urgency among buyers is definitely on the rise.