Ultimately, 2020 was a record setting year in the Denver Real Estate market. While many sectors in the US economy faced daunting challenges, the housing sector showed resiliency and thrived in an otherwise grim year. Amid a global pandemic, here is how the 2020 Real Estate Market compared historically.
Active Real Estate Inventory Sets Record
Among all the records set, active inventory stood out as the biggest surprise. We ended the year breaking through the 3,000 mark for the first time, finishing the year with only 2,541 active listings. For comparison, since 1985 our average active listings have been around 13,000 with a high of 32,000 in 2006. Many professionals believe the 15,000 level to be an indicator of a balanced market.
Many factors could have influenced this record low inventory. For example, uncertainty and health concerns may have persuaded some homeowners to stay in their homes, rather than selling and moving. On demand side, low interest rates created a frenzy of buyers with little inventory to choose from.
Denver Metro Sets Record for Closings
The average closing price for 2020 was $525,000, an increase of 8% from 2019. Since 1990, Denver Real Estate Market has appreciated consistently, except for 2007,2008 and 2009, and has grown 450% in the last 31 years. If we take the recession into account, since 2006 our home prices have appreciated 81%, representing one of the strongest recoveries in the nation. In 2006 the average home price was $288,000. Don’t you wish you could have bought back then?
Last year also set a new high for number of closings in the Denver Metro. We finished the year with roughly 63,000 homes sold, an increase of 6% from 2019. Our previous high was 59,000 in 2017, and 2020 marks the 6th year in a row of over 56,000 homes sold. This can be attributable to increased population growth as well as new housing construction, however it indicates that the fish are biting!
Heavy Buying and Low Inventory Results in Record Low MOI
Months of Inventory (MOI) is a measure of how aggressively those fish are biting. It tells you how long it would take for buyers to purchase the entire inventory of homes if there were no new listings. We finished 2020 with a record low of 1.05 MOI, down from our previous low of 1.17 in 2017. This indicates the current market is significantly skewed towards the seller, as a balanced market would have a MOI in the 6 range.
Denver Real Estate Market Outlook for 2021
The outlook for 2021 contains many of the same characteristics as 2020, however there should be some relief for buyers in the way of inventory. We expect many homeowners who sat on their hands for the past year may finally list this year, however I do not expect inventory to creep anywhere near the range of a buyers’ market.
Interest rates are expected to rise some, right now 2.7-2.9 percent is attainable. But watch out because some experts are predicting rates to rise into the low 3’s. While this level is still historically very low, it could slightly dampen the buyers’ purchasing power. Speaking of buyers, we expect them to remain out in force in 2021. People are still flocking to the Denver area in droves from higher priced cities in California, Oregon, and New York.
From our analysis, we expect a persistent housing shortage to keep home prices elevated in the Denver Metro. Record low mortgage rates, tele-working, migration from feeder cities and millennials should keep this sellers’ market hot.