Sellers may have to negotiate a little more than before, but they maintain a strong grip on metro Denver’s housing market, even as other once-hot areas like Miami and Honolulu shift in favor of buyers, according to Zillow’s “Market Heat Index.”
The index measures whether sellers or buyers dominate a given market or if a market is “neutral” indicating a balance between the two sides. After briefly touching neutral territory In October and November, metro Denver shifted back to a “strong seller’s” market this year with a heat index score of 71.7 in April.
“It’s all about supply and demand. Even if demand holds steady or falls slightly, a substantial decrease in supply causes the housing market to tighten, pushing prices higher. Similarly, higher incomes and wealth, which push demand higher, have the same impact on market tightness if supply doesn’t keep up,” said Orphe Divounguy, a senior economist with Zillow.
Sellers remained in charge in metro Denver despite a 20.2% gain in the number of homes for sale and a 23.6% gain in new listings the past year and a Zillow Home Price Index just shy of $600,000. Someone earning the median income in metro Denver would have to devote 43% of their income to afford a typical home, assuming 20% down, which restricts the pool of potential buyers, Divounguy said.
So why wouldn’t so many buyers getting priced out shift the balance of power? New construction in Colorado isn’t rising enough to meet demand as it is in states like Texas and Florida, which are shifting more toward the neutral or buyer’s camp. And metro Denver, despite its higher price point for homes, remains attractive for those relocating from California, which is even more supply-constrained and expensive.
It is worth noting that wages rose faster in metro Denver the past year, 13.5% through March, than the 4% gain seen nationally, Divounguy said. That was above the 2.6% gain seen in home prices.
Most of the strongest seller’s markets are primarily located in more affordable and long-overlooked areas. The three strongest seller’s markets, with scores above 100, are all in New York: Rochester, Syracuse and Buffalo. Also up there are Hartford, Conn., Springfield, Mass., and Albany. And two other big cities starting with M, not Miami, are hot markets right now — Minneapolis and Milwaukee.
California, due to inadequate construction, remains a strong seller’s market, particularly San Jose, San Francisco and Los Angeles, and that could be putting pressure on surrounding areas like Seattle and Denver.
Eleven markets, primarily in Florida, have swung over to the buyer’s side, with supply outpacing demand. Cape Coral, Fla, had the lowest heat score of 34.3, followed by McAllen, Texas, at 36.1 and Northport, Fla., at 37.7. Among larger cities, Miami, New Orleans, Honolulu and Jacksonville, Fla., are buyer’s markets.
It should be noted that there are no “strong buyer’s” markets yet and the score for the U.S. is 60.3, which indicates a seller’s market.
Salt Lake City remains a strong seller’s market, while Colorado Springs is a seller’s market, with a score of 66.5.
Much of Texas is in neutral territory and Austin, a rival of metro Denver, has gone from one of the country’s hottest real estate markets in 2021 and 2022, with a peak score of 154.3 to a neutral score of 52.1.
“In many Texas and Florida markets that are most favorable for buyers, especially in Austin, the increase in inventory is the biggest factor,” Divounguy said. “New construction has been best able to keep up with demand there, which is limiting competitive pressure for each home.”
