Thanks to rising interest rates, which varied from the low 3% to over 7%, the last year or so has been a unstable one in housing. Those rates have eaten into buyers’ budgets, causing a pullback in overall demand and home prices.

However, in the Denver metropolitan statistical area even declining demand can’t alter the market much – not with the ultra-low supply our area is dealing with. In fact, despite the changes today’s higher mortgage rates have ushered in, Denver still ranks as the fourth-strongest housing market in the nation, according to the U.S. News Housing Market Index.

What changed in 2022?
Permits to build new, single-family homes plummeted in 2022, falling from a March high of 1,378 to just 475 by year’s end. Things picked up slightly in January, but still, in the last three months where data is available (November-January), the Denver metropolitan statistical area, which includes Aurora and Lakewood, saw only 1,542 single-family permits approved. That’s down about 51%, from the 3,167 approved a year prior.

Multifamily permits fell quite a bit in 2022, too. Like those for single-family properties, they nudged up just a bit in January but are still significantly under the prior year’s numbers. Between November and January, 3,180 multifamily permits got approved. The previous year, it was 4,658, marking a nearly 32% drop.

Home prices in Denver
When mortgage rates started to rise in mid-2022, median prices started to drop. In the Denver metro, they peaked at $615,000 in April, falling to $535,000 by January, according to Redfin. Despite this, prices are down a mere 0.9% compared to the year prior and are also well above the nation’s $383,000 median – largely thanks to the city’s low supply.

Where are we headed?
With low unemployment, low supply and improving customer sentiment, Denver’s housing market is poised to carry on strong. While increased builder confidence could lead to more supply, our forecasts predict building permits will fall – at least for the next few months. This should keep supply low and demand strong for the area’s very limited housing.

If you’re considering a home purchase in 2023, it’s time to start preparing as the market heats up. Contact Metrowest today and let’s discuss your options!