DENVER HOUSING 2Q17: Record Prices Push Activity into Attached Product – and the Resale Market becomes a more Affordable Option

  • At no time in Denver’s history has housing been as expensive as it is now with only 28% of new home starts priced below $400,000. As a result, many prospective entry-level new home buyers are left out of the market, and those that can afford to buy have few options
  • While quarterly starts are essentially flat, there has been steady growth over the last twelve months with 11,598 annual starts in 2Q17, up 8% from 2Q16.
  • The strongest growth in starts and closings over the year has not been for detached homes, it has actually been for attached product, which now represents over 30% of all activity, the highest level since 2008.
  • Home prices for resale and new home are both at all-time highs, but the gap between the average resale and new home price is now about $110,000, which will continue to push prospective buyers to the existing home market as a more affordable option

According to Metrostudy’s quarterly lot-by-lot field survey, 3,033 homes were started in the second quarter, up 1% from the first quarter, and down 2% from 2Q16. These start figures account for all product types including single family detached, townhomes, duplexes and condominiums. While quarterly starts are essentially flat, there has been steady growth over the last twelve months with 11,598 annual starts in 2Q17, up 8% from 2Q16. Builders closed 2,765 homes in the second quarter, up 15% from the first quarter, and up 20% compared to 2,309 homes closed in 2Q16 and the highest number of homes closed in any quarter since 4Q07. Annual closings in 2Q17 increased 17% to 10,239 units compared to 2Q16. The strongest growth in starts and closings over the year has not been for detached homes, it has actually been for attached product, which now represents over 30% of all activity, the highest level since 2008.

As expected, housing starts leveled off in the second quarter, while completions and closings increased. Builders continue to navigate a difficult combination of tight trade labor and on-going high demand for homes, as their focus has turned toward completing homes as quickly as possible to better manage buyer expectations. As a result, quarterly starts have leveled off and closings are up sharply.

“Housing affordability continues to be a major concern for the industry, prospective buyers, and government and economic development officials,” said John Covert, Regional Director of Metrostudy’s Denver market. “At no time in Denver’s history has housing been as expensive as it is now with only 28% of new home starts priced below $400,000. As a result, many prospective entry-level new home buyers are left out of the market, and those that can afford to buy have few options; among them are either move further out into the periphery, or move into more affordably priced attached product. The average detached new home sales price is now at $534,870 for the trailing 12 months ending in June, 4% higher than a year ago. At the same time, the average finished square footage of homes has stayed relatively flat over the year at 2,730 square feet.”

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Demand remains strong for homes in general as the existing home market has pushed to new highs and new home inventory remains tight. Home starts have slowed in the 2nd quarter following high levels the previous several quarters, allowing builders to get caught up and close inventory. Home prices for resale and new home are both at all-time highs, but the gap between the average resale and new home price is now about $110,000, which will continue to push prospective buyers to the existing home market as a more affordable option.

The existing home market continues to set new high-water marks for sales volume. There were 5,712 sales in June, up 1% compared to a year ago. Year-to-date sales are up 6% and annual sales are now at 57,477 ending in June, up 3% over 12 months. The number of listings has increased slightly allowing for more sales volume, reinforcing how strong demand remains in the market. There were 7,059 active listings in June, a 20% increase from May and a 4% increase from last year. Average days on market is only 23 days, the lowest in 15 years and supply of listings remains near historic lows, at 1.5 months, way below the 4-5 month equilibrium. The average sales price in June for existing detached homes was $498,762, the highest on record.

For information contact:
John Covert – 720.493.2020 x 201
jcovert@metrostudy.com

About Metrostudy: Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide.  Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day.  www.metrostudy.com

About Hanley Wood: Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

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