HOW CAN THE MEDIAN HOME PRICE BE RISING WHEN PRICES ARE FALLING?

Last week, the Denver Post reported two seemingly contradictory items - that active inventory in the Denver metro area had topped 14,000 listings for the first time since 2011 while the median home price actually increased by just under one percent from a year earlier. 

This paints a deceiving picture because I hate to break it to you... but home prices are definitely falling.

The median home price is simply the number at which half of the homes sell for more and half of the homes sell for less.  It's a closely followed metric because it is considered to be more representative than the average home price, which can be swayed by outlier high-end sales.

Median home price numbers also look backwards - at closed sales.  

It's always been my preference to look forward, which means focusing on current active inventory counts and pendings from the past 30 days... rather than closed sales, which tell you where the market was 45 - 90 days ago.

Right now, our absorption rate numbers are downright ugly.  If three months of inventory represents a balanced market (which is my view), consider the following comparison between July of 2025 and July of 2024:

July 2025 vs July 2024

$0 - $250k:  6.37 months of inventory / 3.76 months of inventory

$250k - $400k:  4.41 months of inventory / 2.55 months of inventory

$400k - $600k:  3.24 months of inventory / 2.09 months of inventory

$600k - $1M:  3.76 months of inventory / 2.35 months of inventory

$1M and Up: 5.02 months of inventory / 4.24 months of inventory

These forward-looking numbers make it quite clear that prices are in the process of coming down.  

The reason the median price is up isn't because prices are rising... it's because the bottom of the market has totally washed out and there aren't any transactions happening there.  

When you don't have any sales of $300k condos, for example, the median price is going to go up because, comparatively speaking, there is a much larger cluster of homes selling between $400k - $1M.

To illustrate this, right now there are a total of just 647 homes under contract below $400k in the metro area, while there are 2,982 homes under contract between $400k - $1M.  That much higher transaction count further up the ladder drags the median price up, but it doesn't reflect what's really happening inside the market.

Zillow's "Home Price Index" (HPI), which puts more weight on repeat sales of existing homes than what types of homes are selling... paints a very different picture.  For the Denver market, Zillow's HPI peaked three years ago in July of 2022 at $613,526.  It's HPI for July of 2025 is $558,705, which represents a decline of almost 9% from the peak.  

That's much more aligned with reality.  

Admittedly, I have taken a more bearish view of housing over the past 24 - 36 months than most of my colleagues.  But after 30 years in the industry, I have learned that looking forward is a far better indicator of where things are headed than looking back.  

The second half of 2025 is going to be rough for a lot of sellers, agents and lenders.  Prospective buyers are going to continue to pull back until they see some green shoots in the housing market.  

Bookmark this post and look back at it later this fall, and you'll see that the writing was on the wall.

Reality is going to bite until rates come down or prices re-calibrate to bring some degree of affordability back into a totally broken housing ecosystem.  

CHECKING IN ON DENVER'S 2025 SPRING MARKET

If you have followed the Front Range real estate market for any period of time, you know that buyers tend to show up early in the year and inventory tends to rise as we get closer to the end of the school year.  This year, pendings have been almost even with 2024 but active inventory is rising... significantly.

I've always educated my clients that the optimum time for listing a home in the Denver metro area is from mid-January until about mid-May.  This is based on years of following absorption rate trends - in short, the absorption rate is a calculation that determines how many weeks (or months) it would take to sell a home based on the current pace of sales.

In 2024, for example, our lowest absorption rate occurred in April with 1.54 months of inventory (MOI)... and our highest absorption rate was in November, with 3.17 MOI.  Hence, best for sellers in the spring, and best for buyers in the fall.

In 2022, our lowest absorption rate was in February with 0.32 MOI and our highest absorption rate was again in November, at 2.45 MOI.  Again, a far better selling environment in the spring than in the fall.

If you're selling, you obviously want the greatest leverage versus buyers, which is reflected by a low absorption rate.  Conversely, if you're buying, your maximum leverage is when there are more sellers than buyers, which is reflected by an elevated absorption rate.

As of March 31, our market currently has 2.42 MOI, which is significantly higher than this time in recent years.  If fact, if you look at the absorption rate in March over the past six years, we had 1.43 MOI in 2019... 1.23 MOI in 2020... 0.41 MOI in 2021 (3% mortgages)... 0.43 MOI in 2022 (4% mortgages)... 1.14 MOI in 2023 (6% mortgages)... and 1.66 MOI in 2024 (closer to 7% mortgages).

This means at the current pace of sales, it would take almost 2.5 months to sell all of the homes currently on the market.  In my view, anything over 3.0 months constitutes a buyer's market. 

There are currently about 8,400 active listings on the market.  This is up 51% from the same time in 2024... up 106% from 2023... and up 383% from the unhinged crazy spring market of 2022.

What does it all mean?  Based on historical trends, 8,400 active listings in March could put us on track for 13,000 - 14,000 active listings by Labor Day, which would be the highest inventory count since 2011.  If demand remained just equal to 2024, that would equate to ell over 4.0 months of inventory.

The bottom line is that sales are still happening, but buyers have more choices... lots more choices.  To be successful in this environment, sellers needs to have a tangible value proposition... which means it either needs to shine like nothing else on the block ot be priced ultra-competitively vs recent comps.

In a related state, 35% of all homes that have gone under contract in the MLS this year have come back on the market at least once.  By comparison, in spring of 2022 this figure was 5%.  In other words, in 2022 (with 3% mortgages) 19 out of 20 homes that went under contract closed with that first buyer.  Today's it's more like two out of three.  Yikes.

The only way to combat this is to pay extreme attention to every aspect of the home selling process.  From pre-market prepwork to excellent staging to professional photography to well-promoted open houses to engagement with each and every agent who shows your listing... in this market, everything truly does matter.  

The market of 2025 has been much more segmented than in previous years.  There are most definitely hot pockets and cold pockets.  Three of my six listings this year have attracted multiple offers.  Location is a huge factor.  But so is condition and pricing.  As I've said repeatedly for the past two years, if you're selling a home, your motivation needs to be an 8, 9 or 10... not a 5, 6 or 7.  

When will things turn around?  The frustrating answer is that no one knows.  But demand repressed is not demand destroyed.  There are thousands of aspiring buyers on the sidelines, waiting for rates (or prices) to come down so that home ownership - the Great American Dream - is attainable once again.

WHAT THE FIRST FOUR WEEKS OF 2025 HAVE TAUGHT US ABOUT THE DENVER HOUSING MARKET

Two things can be true at once.

The first truth is that active housing inventory was up 57% in January versus a year ago while pendings are only up nominally.

And the second truth is, despite these much higher inventory counts, it's still the best time of year to put a home on the market.

I can't sugarcoat things here - the old market is gone.  The number of homes for sale in January was up 57% versus 2024... up 77% from January of 2023... and up (are you ready for it?) 523% from the housing market insane asylum known as January of 2022.

In other words, there are a lot of homes for sale.  And with mortgage rates in the 7% range, affordability remains severely constrained.  

Historically, we start each year with inventory at its lowest point and then inventory climbs right through the spring and summer, peaking around Labor Day.

Last year, inventory increased 129% between January and August.  In 2023, inventory climbed 75% between January and August.  If you take the average of the past two years - 102% - and then apply that to our current inventory count, it's not unreasonable to believe we could have more than 14,000 homes on the market by he middle of this summer.  That would be the most inventory we have had for sale since 2011. 

Now it is also true that demand picks up as you move into spring.  In fact, if you're looking for a silver lining, pendings were up 19% in January versus January of 2024.  So we actually have more buyers in the market right now than a year ago - we just have more new listings than new buyers.

What this means is if you have a home to sell, you can list in the current environment... with 7,000 other homes for sale.  Or wait until summer, when you could see 14,000 (or more) competing listings on the market.  The math on that is pretty clear to me.

One significant development at the end of 2024 was that more than 4,600 listings either expired or were withdrawn from the market in December.  That's the largest year-end inventory drawdown of inventory I have seen in 19 years in Colorado.  To me, this represents the dead underbrush of the market, mostly stale listings that were overpriced or just lacking an overall value proposition.

That means even though there are more listings, there is less junk.  And so for attractive homes in good areas, competition can still be a thing.  One of my Summit Home Sales partners experienced a five-offer bidding war on a $900k home backing to open space last month.  And I showed several homes to buyers in January that came off the market in a week or less.  

But it all boils down to value proposition.  

Buyers want one of two things... it either has to be in elite condition in a great location... or it needs to be priced more attractively than anything else on the block. 

The rest of the market lands in the mushy middle, and even with more buyers coming back, it's the homes with the strongest value propositions which sell first.  

IT'S JANUARY... AND THE HOME INVENTORY PICTURE JUST SHIFTED

If real estate is a supply and demand game, then the most consequential day of the year is December 31.

That's because a majority of listing agreements taken during the second half of the year have an expiration date of December 31.  And a lot of properties didn't sell during the second half of 2024, which means we are ripe for a reset.

In December, a mind-numbing 4,633 listing agreements expired in the Denver MLS, including 2,030 on December 31 alone.  That collapsed our active listing inventory from over 10,000 properties at the end of October to just 6,400 as we start the new year.

Because the market has been so sluggish, active listings were elevated throughout the year, including five consecutive months (July, July, August, September and October) where there were more than 10,000 homes for sale.  For most of 2024, active inventory was 40% - 70% higher than in 2023.

So what this giant purge really means is that the deadwood in our market has been cleared out.  The overpriced listings, unmotivated sellers and stale real estate is gone.  What you have to start the new year is a significantly smaller, better pool of homes for sale... at a time when buyers traditionally come back in much larger numbers.

There are still 6,400 homes on the market... that's well above the 4,600 we had to start 2023 and 2024 and way above the zero-inventory days of the pandemic era, when we had just 2,500 active listings in 2021 and 1,400 active listings to start 2022.  

So it doesn't automatically shift the pricing dynamics or guarantee frenzied bidding wars.  But what it does mean is that the market just became a whole lot leaner and more efficient, with fewer listings and more buyers.  It's a much better environment for sellers while most buyers won't have near the same leverage on things like seller concessions and inspection requests.  

From now until mid-May, the Denver housing market will suddenly look and feel a whole lot healthier.  At least until we see more sellers streaming back into the market in late spring when the school year comes to an end.