There is a lot to digest in the April DMAR report, so let’s dive right in. Month over month, prices in the Denver Metro area had a strong increase, rising 3.75% for median and 3.57% for average residential prices. Year over year the pace of the housing prices increase rose with the average residential prices rising 1.79% and the median residential prices rising 1.53% from March 2018 to March 2019.
Housing inventory is up 4.57% to 6,017 from February to March. However, if we look at the year over year inventory statistics, inventory is up 36%, which is a good sign for buyers at the beginning of the important spring buying season. The 6,017 homes available were still far below the historical norm of 14,734, showing the marketing inventory is still tight relative to history.
Sold homes were down almost 11% year over year, but up 20% month over which was to be expected as March is the first month of the busy spring season. Buyers appear to be coming back to the market, even with prices still rising. We think the drop in mortgage interest rates this month is having a large positive effect on home prices, acting as a key support column. The 30-year mortgage hit a year low in March 2019 and that would have lowered the ever important monthly mortgage for potential buyers.
Homes are sitting for longer with the average home sitting on the market for 31 days up 14.81% year over year, but down 20.51% from February, another sign that buyers are back in town.
It is not a buyers market, but buyers have come back in March without waiting for a correction. Jill Schaffer, Chair of the DMAR Market Trends Committee, said “Does (strong March sales) mean we are in for another record-breaking spring and summer, or are there signs that we are calming down and balancing out? In my opinion, we won’t be breaking records, but we aren’t slowing down either, just enough to take a big breath and get back out there ready to buy and sell.” We were forecasting March inventory to up and thought that would have put pressure on March’s prices, but prices still rose. If April single-family homes prices rise 1.11% from current levels, April’s prices would be on pace to be flat year over year.
We see April’s prices year over year flat but, more inventory in the market. The YTD inventory (Jan to Mar 2019) levels for Metro Denver was the highest since 2015, validating our call from last month. It looks like increase housing supply is still not putting a dent in prices, but is limiting price growth.
So if the bubble is not bursting what’s going on? We think our biggest oversight was not seeing the decline in interest rates in the economy. We were forecasting interest rates to be continuing to rise in 2019 as the Federal Reserve had been communicating this for a while, only stopping in December 2018 after the stock market meltdown. For a while, low-interest rates can juice home sales, but low-interest rates are typically a sign of collapsing inflation expectations in the long term which means a recession is on the horizon. If a recession hits, we don’t care if interest rates go to zero, if people don’t have jobs they are not buying homes. So metro Denver market, enjoy your sugar high from low rates, but low rates a sign of bad days to come.