Inventory isn’t the problem, ‘Active Inventory’ is

By Matthew Leprino

It seems you can’t open your social media app or tune in to the local news without hearing about the lack of options for homebuyers these days. Denver is facing big city problems while it continues to grow into that role.

Along with increased pressure on developers to turn over a quality product – and fast at that – the prices, oh, the prices (insert ‘oh, the humanity’ gasp), continue to extend the limits of what we consider “affordable” and modify the expectations of Denver’s housing landscape.

We are inundated with the rhetoric because it is, by in large, true. What the narrative doesn’t quite cover though is that the number of homes coming to the market is on the rise. We have seen year-over-year inventory increases over the last couple of years, though arguably far behind what the market is requesting.

Consider January as a basis of which to compare months. Historically, one of the lowest activity months of the year, a 17 percent increase in the number of homes introduced to the market has occurred in just two years, according to new data provided by the Colorado Association of REALTORS®.  During January 2016 there where 4,146 new listings within the Denver Metro Area as compared to January 2018 where new listings reached 4,993.

‘So how on earth could our inventory concerns be true with that type of jump,’ one might ask themselves? The answer; demand – that old foe of supply is pushing harder and harder making these noteworthy increases virtually negligible and further punctuating the insatiable appetite for housing in the Front Range.

With 3.2 million residents now calling the Metro Area home, up from 2.5 million just 10 years ago, the 28 percent increase certainly is not growing at the same pace as our inventory. A gap of active inventory not growing parallel to population growth brings about a true concern when we consider that there are those out there who are proposing a statewide one percent cap on residential development. A cap which would not only push Denver’s housing market further from balance, but one which would most certainly have the direct opposite effect on inventory and affordability. When we consider that supply would not only vanish but regress, demand would runneth over and your typical 100-year-old, 1,000-square-foot bungalow in West Highland could quickly become a $2 million estate.

The Metro Area now has just 1.1 month’s worth of inventory, lower in Denver at just 0.7. A number which reflects how quickly current demand will evaporate inventory. These supply numbers have been in a free fall, with the exception of a small bump last summer, for several years now, which continues to keep sellers in the driver’s seat.

With inadequate supply and insatiable demand being the real concern here, the similar and equal concern is when buyers and sellers will ever meet again in a balanced marketplace. Until they do, prices will continue to rise, buyers who are not used to settling will require concession and even though interest rates will rise this year, real estate will continue to sell metro wide as Denver has officially outgrown its medium city cocoon and is beginning to grow in to its big city wings.

Matthew Leprino is Broker/Owner of Leprino Home, Inc. and spokesperson for the Colorado Association of Realtors. He can be reached at: 303.482.1299 or [email protected]