The Market in Review
Listings, listings everywhere but not a home for me.
I’m not exaggerating when I say that local housing inventory has skyrocketed this spring. Have you noticed the sheer number of 'For Sale' signs popping up in your neighborhood? In the foothills—and the Denver metro market in general—we usually see peak inventory in August or September. But as of the end of May 2025, we’re experiencing the highest level of active listings in over a decade. That's about 50% more homes on the market compared to May 2024, and more than double what we saw in May 2023.
So, what's behind this surge in supply? Several factors, I believe. For one, the simple cost of maintaining a second home or a house that’s too big for current needs is rising. Property taxes and homeowner's insurance have climbed steeply in recent years, making these 'extras' less feasible, especially with the current economic uncertainty in the US. Additionally, many investors are divesting of rental properties in Colorado. Recent legislative changes have created a more tenant-friendly environment, and many landlords are hesitant to navigate these new risks.
Alongside the higher supply, we've seen lower demand due to interest rates being significantly higher than they were two or three years ago. A year ago, I described the market as stubborn, with both low supply and low demand. Now, we're facing increased supply but persistently low demand. The primary buyers at the moment are first-time homebuyers and those who must move—and many of the latter are ending up renting. Not many people are willing to give up their 2.5%-3.5% mortgage rates to purchase with a 6% rate. While websites like Zillow, HomeBot, and Realtor.com might suggest 'pricing is holding steady,' high supply and low demand indicate this won't last. The laws of supply and demand suggest we're headed for some price adjustments.
One nuance in this market is that homes above $2.5 million are often purchased by individuals less affected by higher interest rates. In fact, these well-capitalized buyers might even see portfolio benefits from higher returns in a higher-rate environment. It’s the rest of the market that’s feeling the pinch. Sales of $2.5 million to $5 million homes in areas like Evergreen can skew the overall average, but the median price is a more accurate market indicator for most home sellers. That's also why areas like Conifer and Bailey, which don’t have as many homes in that higher price bracket, may appear to be experiencing more significant declines. But truthfully, if we look solely at homes below $2.5 million, all areas are either flat or trending downwards, and I think this is just the beginning.
When looking at the rolling 12-month average home prices in the foothills, it seems we’ve been hovering around $1.1 million. However, when you dig into the median sold price, especially in Evergreen, a downturn is underway that might not be immediately evident in broader data. For instance, the median closed price in Evergreen in May 2024 was $1.2 million, while in May this year it was $950,000. That's a significant drop, but it gets lost in those widely advertised rolling averages.
What could shift this market? Is it a temporary downturn or a sign of something bigger? Right now, a significant, immediate change seems unlikely. While there's much discussion about lowering interest rates, the Federal Reserve is likely to hold steady until inflation is clearly under control, particularly with the lingering uncertainty of tariffs. This suggests a swift return to a booming buyer’s market is improbable. We’ll likely see new homebuyers adapt to 6% mortgage rates, especially when compared to rising rental costs. Relocations and job changes will continue to drive some movement, but not enough to satisfy sellers’ expectations. Moreover, buyers who recently sold at lower prices will be hesitant to overextend themselves. Therefore, expect continued high inventory and slightly declining prices for a while. We’re not facing a dramatic market collapse, nor will we see a quick return to the frenzied activity of 2020-2022, which saw nearly double the closings of May 2025. In essence, the housing market is currently neither strongly favoring buyers nor sellers, creating challenges for everyone. While it’s essential to have clear needs and expectations, it's also wise to recognize that the market may not immediately align with them, as both sides face challenging circumstances. So if you’re entering into the journey of a purchase or sale of a home, take a deep breath and work with a local real estate professional that you trust and hopefully even enjoy, because it likely will not be a quick, seamless journey.
With warmth and grace as always, Julia
