The sudden rise in mortgage rates has homebuyers and potential sellers asking their real estate agents whether Colorado’s red-hot market is cooling off.

And while agents aren’t seeing anything dire on the horizon, they do perceive things have changed, and that the peak of the market may have passed.

“I think we hit a peak in late March or early April,” said Sunny Banka, managing broker of Greenwood Village-based Sunny Homes and Associates Inc., who tracks data on Aurora and Arapahoe counties on behalf of the Colorado Association of Realtors.

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Banka notes that over recent weeks, she’s getting 25 emails a day from agents announcing price reductions on homes.

“Right now, inventory is a box of chocolates, and everybody wants the good ones,” she said.

Homes in very good condition will still move rapidly, she notes, but less-appealing listings are going to sit for a while longer.

“What I’m paying attention to is how drastically the average price has changed,” said Matt Leprino, spokesman for the Colorado Association of Realtors, which released its May 2022 Market Trends Housing Report Friday.

The average home price, Leprino notes, tends to be driven by a smaller number of very expensive properties that can skew the average skyward — one factor that drastically pushed prices up this past spring, when the average sale of a detached home in the Denver metro area was near $800,000.

“When we suddenly see average prices, which had gone up $100,000 a month in Denver, drop off, it means the really expensive homes have hit the wall,” Leprino said. “On a $3 million property, when you have huge interest rate shifts, we’re talking really big-buck changes between payments.”

The statewide average single-family price, $750,143, remains more than 14% higher than the average a year ago, the new CAR data shows. The median price of a freestanding home in the Denver metro area dropped from $660,000 to $650,000 over the month — still well up over May 2021.

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“We’re definitely seeing more inventory and a lot of price reductions,” said Amy Berglund, managing broker of Re/Max Professionals’ City Properties office in Denver’s Highlands neighborhood, a popular area luring younger homebuyers with its abundance of dining and its proximity to Lower Downtown.

“Properties have fallen out of contract and come back on the market,” said Berglund. “There is still very strong buyer demand, but they’re being much more picky, and their purchasing power is a little diminished, so they’re taking more time.”

That, said Berglund, is causing sellers to panic a little: “Things are not flying off the shelf; rather it’s more indication of a return to a normal market.”

Over Memorial Day weekend, Berglund had clients who were watching a listing in West Highlands that had come on the market in the $1.3 million range, then remained unsold the following week.

“The agent did a $75,000 price drop,” Berglund said. 

A bidding ware followed, resulting in a sale that was still beyond the original list price.

“I’m telling sellers you have to be shrewd on your list price, you can’t overprice, and you might want to be a little under where you would have been in the spring,” Berglund added.

Agents said that inventory of homes, which has grown considerably over recent months, is still offset by unusual demand from buyers entering the Colorado market.

Banka, who also serves on Aurora’s Planning & Zoning Commission, notes that the city’s May numbers show 850 closed sales, with another 921 sales pending — even as inventory rose to 518 active listings from fewer than 190 in March.

“You still have a very strong sellers’ market,” she said. “We’ll see things calm down a little. It won’t be as crazy, and that’s a good thing.”

Other numbers from around the state followed suit.

Along the U.S. 36 corridor northwest of Denver, where bidding wars had been reaching 20% over list price and where buyers were waiving all conditions on their offers, the market has backed off from what was doubtless an unsustainable rise, said CAR’s Leprino.

In Colorado Springs, the median sales price was up 13% year-over-year for single-family homes and days-on-market remained flat. The townhome-condo market saw a 20% increase in typical days required for a sale. Douglas County registered a 1% decline in the single-family median sales price, after hitting an all-time high of more than $773,000 in April.

In Fort Collins, rate increases have been prompting buyers to push the pause button, according to the CAR report, with more homes coming on the market, while prices remain relatively stable.

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In Grand Junction and Mesa County, new listings were down 2.4% over a year ago, at a moment when inventory usually rises, after a 17.9% runup in median price.

Big year-over-year price runups were typical in some more remote areas — with the average sales price up 30% from a year ago in Durango and La Plata County. In Steamboat Springs and Routt County, sellers were offering price reductions and were accepting contingency offers, according to the CAR report.

In other resort markets including Summit, Park and Lake counties, median prices are well up over the past year, while active listings have increased. In Vail, the inventory of homes on the market rose since the first of the year, but still shows 25% lower than a year ago, and at just 40% of long-term averages.

In Telluride, agents are seeing fewer sales but are marking record prices. That’s despite an enormous increase in construction, the biggest boom since the early 2000s, according to CAR.

Some agents noted that a drop in sales is typical for this time of year, and that the summer market is often a slow season for outdoor-oriented Colorado buyers. But CAR’s Leprino said that despite some regional fluctuations, he sees a commonality in the numbers that suggests a cooling off.

“I think this is more the simple seasonal shift,” said Leprino. “When you’re starting to see price reductions, we’re on the other side, and have reached our cap.”

That, however, doesn’t indicate any dramatic downturn, despite national worries about inflation and the risk of a recession.

“Everybody thinks if you have a boom then you have to have a crash,” Leprino said. “We still have such a profound lack of inventory that it will be a long time before we see anything going really south.

“The pot’s not boiling, but it’s still hot enough to cook an ear of corn,.” 

The CAR Monthly Market Statistical Reports are assembled by Showing Time, based on data from Colorado Multiple Listing Services. Metrics don’t include for-sale-by-owner transactions or all new home construction. CAR represents 29,000 Realtor members statewide, on the web at coloradorealtors.com.