The newest Case-Shiller figures were released and as expected the year-over-year pace of home-resale price gains still led most others for percentage price gains. In real numbers, prices in April 2016 rose 9.5% from one year prior. If you follow my blog you know 10% has been the average gain over the last few months when compared to one year prior.
Two cities surpassed Denver’s gain by small increments, Portland and Seattle. Of the 20 cities tracked the average gain year-over-year was 5.4%. What si more impressive and yet also possibly troubling is Denver is one of 7 cities with resale prices at an all-time high. The other cities are Dallas, Portland, San Francisco, Seattle, Charlotte and Boston.
As an active broker and in discussion with peers we have become a little bit concerned (and it may be a seasonal issue) of the following:
-Homes on the upper-end of the market i.e. above the FHA conventional loan amount (for Denver) of $458,850 seem to be lingering on the market for longer periods of time.
-We brokers are witnessing across the board price reductions in a few specific neighborhoods where inventory has increased exponentially versus true demand. Most of this inventory is oriented towards the luxury market.
-Potential over supply of deluxe and luxury rentals in hot neighborhoods including Cherry Creek and Downtown as well as select suburban communities which assumes the continued influx of residents proceeds unabated.
-Record low interest rates yet buyers still on the sidelines.
As a broker for 25+ years I have been though such cycles prior. We are in a goldilocks period of low inflation, low interest rates and increased supply. Yet there still seems to be a slow down in the upper segments of the market which may eventually trickle down to the larger overall market.
Metro Denver has a history of developing excess inventory during up-cycles. Coupled with the City and County of Denver desiring to increase density in established older neighborhoods there are concerns regarding quality-of-life, congestion and affordability.
With today’s news advising the Federal Reserve may begin to increase interest rates by year’s end we should see fence-sitters locking in historically low interest rates before the election. If interest rates do rise and buyers continue to sit on the side-lines we may have larger issues going into 2017.