When it comes to metro Denver’s housing market, 2015 will go down as the year when home prices and rents blew the roof off.
Double-digit home price gains consistently made metro Denver a top market for home price appreciation on a variety of surveys. And rent increases, while slowing as the year wore on, were among the highest outside of California.
Zillow’s home price index for metro Denver in November showed a 15.5 percent annual increase to $318,000, marking the 10th consecutive month Denver has led the country’s major metros for home price appreciation.
Metro Denver also tied for first on the S&P/Case Shiller home price index with a 10.9 percent increase in home values in October, continuing a long streak of nation-leading appreciation.
Inventory shortages, especially for lower-priced homes, set off bidding wars in the early part of the year.
Homes sold in about 23 days, with the most affordable properties selling in less than a week. Back in 2012, it took about 80 days for a new listing to sell on average.
The tight market pushed home prices up, adding $39.4 billion in equity for Denver-area homeowners, Zillow estimates. But it also added to the misery of first-time home buyers and renters.
Apartment rent increases in the second quarter in metro Denver were averaging 13.2 percent but slowed to a still-robust 8.8 percent rate in the third quarter as thousands of new units hit the market, according to the Denver Metro Area Apartment Vacancy & Rent Report.
Surging rents encouraged investors to snap up apartment units across the metro area, which in turn displaced low-income tenants of older and more affordable units.
So how did things get so heated? Blame stronger-than-expected migration to the Front Range and inadequate construction.
The state demographer estimates that Colorado added 45,300 new households in 2015, but only 25,000 new housing units.
“The only way to relieve the inventory situation is if we start to build more homes,” said Paul Bishop, vice president of research at the National Association of Realtors during a visit to Denver last month.
Household incomes came nowhere close to keeping pace with rent and home price increases, straining affordability.
Reduced affordability, combined with a worsening downturn in natural resources and uncertainty surrounding interest rates could all weigh on the local housing market in 2016.
Existing home sales in Denver have softened sharply the past few months, although it is too early to tell if that is signaling a peak in the market.
Zillow predicts Denver home prices will rise a much slower 4.6 percent in 2016, still beating the U.S. average, but a big drop from 2015.
