Metro Denver racked up its fourth consecutive month of 20% plus year-over-year home price gains in October, but the appreciation rocket may have reached its apex and could be preparing to head back to Earth, according to the latest home price indices from S&P CoreLogic Case-Shiller, a closely followed measure of home price appreciation.
Metro Denver home prices were up 20.3% in October compared to the same month a year earlier, according to Case-Shiller. That follows annual gains of 21.2% in September, 21.5% in August and 21.3% in July.
That run-up is unrivaled for its intensity. But October’s monthly change from September deaccelerated sharply to 0.2%, half of September’s monthly pace, a quarter of August’s pace and a little more than a tenth of the monthly pace seen in July. It represents the slowest monthly increase measured in metro Denver since December of 2019. As momentum wanes, gravity may be ready to take over unless another booster can be found in 2022.
“After reaching an all-time high in August, annual house price growth in the United States has decelerated in each of the last two months, but appreciation remains well above any rate ever measured prior to this year,” said Zillow Senior Economist Kwame Donaldson in comments on the monthly report.
To put this year’s rates of appreciation in Denver in perspective, annual home price gains entered the double-digit territory in January and by April were accelerating faster than the prior record annual rate of 15% set back in February 2001. By July they were at full thrust, roaring above 20%.
Donaldson said the fuels of historically low interest rates; supply restrictions, which included a foreclosure moratorium, and increased savings that could be be applied toward a down payment are starting to fade. But a robust labor market and rising wages, huge pent-up demand from millennials now at the peak buying age and an unexpected tightening in the supply of homes available for sale could sustain momentum.
“House price appreciation will continue to slow from this summer’s unsustainable levels, but these conditions ensure that growth will comfortably exceed normal rates over the next year,” he predicted.
Denver’s 20.3% annual rate of home price appreciation is above the U.S. rate of 19.1% in October, but it lags behind many other metros. Phoenix was the leader in October with a 32.3% year-over-year price increase, followed by Tampa at 28.1% and Miami at 25.7%.
“The slowing of home prices is most notable in colder and more expensive areas, as well as middle-tier priced homes where homebuyers may have less wiggle room in their budgets. Low-tier priced homes are still in higher demand as entry-level buyers and investors continue to compete for the very limited supply,” said Selma Hepp, deputy chief economist at CoreLogic, in comments on Tuesday’s report.
It is also important to remember that metro Denver has had a much longer trajectory of strong home price gains. Metro-Denver home prices are now 105% above the 2006 housing boom peak, compared to a 48% gain from the prior high nationally, Hepp That is the strongest showing of any major metro, although Dallas is close with a 102% gain.
Chicago, by contrast, is barely above its 2006 highs, while Las Vegas is only 11% higher. Appreciation leaders Phoenix and Tampa are only 30% above their old high price points, catching up only after the pandemic got underway.
