Denver is now the weakest housing market in the United States, according to data from the S&P Cotality Case-Shiller Index, as home values in the city are falling faster than in any other major metropolitan area in the nation—even Tampa.
Home values in the Mile High City were down 2.2 percent in February compared to a year earlier, the biggest decline in the country. The second-steepest drop was recorded in Tampa, which until February was the weakest housing market in the country and where values fell by 2.1 percent year over year that same month.
Denver and Tampa are not isolated cases.
More than half of all major U.S. metros analyzed in the S&P Cotality Case-Shiller Index posted year-over-year home price declines in February, including Los Angeles (-0.8 percent) and Washington, D.C. (-0.1 percent), as the housing market’s weakness expands out of the Sun Belt.
In the Pacific Northwest, Seattle reported the third-biggest home value decline in the country, at -2 percent. It was followed by Phoenix (-1.8 percent), Dallas (-1.7 percent), Las Vegas (-1.1 percent) and Portland (-0.9 percent).
Why Are So Many Cities Seeing Home Values Fall?
The U.S. housing market is currently split in two.
In the Sun Belt and the West, home prices are falling after years of skyrocketing during the pandemic because of an inventory glut caused by dwindling demand and new construction. In the Northeast and the Midwest regions, which have maintained low supply and high, consistent demand, prices are still rising.
This bifurcation began at the end of the pandemic with changes in domestic migration shift and was accelerated by newly built inventory landing in many of the Sun Belt markets, and it is still stark.
But its margins are getting a little fuzzy, as the latest S&P Cotality Case-Shiller Index shows, as the country faces a massive imbalance between sellers and buyers.
“The geographic mix has shifted meaningfully,” Nicholas Godec, the head of fixed income tradables and commodities at S&P Dow Jones Indices, said in a statement.
“Mountain West (Denver) and Pacific Northwest (Seattle) markets now sit alongside Sun Belt decliners Tampa, Phoenix, and Dallas,” he added. “Los Angeles and Washington joined the list of decliners, while Tampa’s decline narrowed for a fourth consecutive month and Denver displaced it as the weakest market in the index.”
“Markets that were holding positive territory as recently as last fall, including Los Angeles and Washington, have crossed into negative annual returns,” Realtor.com senior economist Anthony Smith said in a statement.
“In supply-constrained Midwest and Northeast markets, price growth is likely to hold,” he added. “But today’s data suggest the correction in more supply-rich metros has more room to run, with the broadening of declines into new geographies pointing to continued fragmentation rather than a national turning point.”
What Has Happened to Denver?
Denver’s story is that of many other pandemic boomtowns that faced a stark reversal of fortune after the end of the health emergency. As employers called workers back to the office and mobility across the country decreased, while higher prices and mortgage rates simultaneously chipped away at housing affordability, Denver found itself with a deluge of for-sale homes—and no one willing to buy them.
Last year, Newsweek reported that the inventory of for-sale homes in the city reached its highest level in more than a decade, a growth that experts predicted would translate in plunging prices.
A combination of factors is to blame for these price drops. This includes the slowdown in migration to Colorado from other states—similar to that experienced by other pandemic boomtowns, such as Austin and Tampa—the increasing cost of building insurance, and more stringent guidelines for condos, which have caused a downturn in demand for these units.
Are Things Getting Better in Tampa?
Florida cities have dominated experts’ lists of the markets facing the largest price drops for the past year. But the stark correction that has taken place in many of these metros is now easing, as data for Tampa shows.
In March, according to Redfin data, the median sale price of a home in Tampa was $433,000, up 4.3 percent year over year. It was the third month of year-over-year increases after eight consecutive months of year-over-year drops.
“While softness—and even outright weakness—remains in parts of Florida’s housing market, the intensity of the downturn in Florida has eased somewhat in recent months,” real estate analyst Lance Lambert recently wrote for ResiClub.
“As Florida home prices have softened—and, in some pockets of the Sunshine State, experienced material corrections—overvaluation has come down and fundamentals have been healing across many markets in the state,” he said.
“As that has occurred, coupled with some builders slowing spec construction, the correction in Florida has lost some momentum over the past year,” Lambert continued. “Additionally, some sellers who aren’t in financial distress have seen enough declines and are attempting to wait out the weakness.”
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