New household formations surged in the fourth quarter, and such acceleration, while long overdue, could further stretch metro Denver’s already thin inventory of available housing.
Before the recession, 1.2 million to 1.3 million new households formed each year on average in the U.S., but that rate has run closer to a “dismal” 500,000 most years since 2008, economist Elliot Eisenberg told a gathering of the Denver Metro Association of Realtors on Tuesday.
In the fourth quarter, formations unexpectedly accelerated just shy of 2 million households a year, according to the U.S. Census Bureau.
While that pace probably isn’t sustainable, more robust job creation, easier lending standards and higher confidence are pushing more people to move out on their own.
“You can’t produce 3 million jobs and not have household growth,” said Eisenberg.
Normally, that would be good news, but the prospect of even more renters and buyers scrounging the market created trepidation among some in the audience, who voiced their concerns about a lack of inventory.
DMAR’s research showed only 4,355 homes listed for sale in the metro area at the end of 2014, compared with more than 18,000 in 2010.
Homes are selling in 38 days on average, compared with 108 days in 2011. A supply shortage is not only frustrating buyers, but it has left some sellers fearful of listing a home and has driven up prices.
Metro Denver’s median home sold price last year was $306,000, way ahead of the U.S. average of $209,5000, according to the National Association of Realtors.
“We are viewed as an expensive housing market,” said Patricia Silverstein, president of Development Research Partners in Jefferson County.
Average monthly apartment rents now top $1,000 in every metro county, Silverstein said. A surge in new apartments hitting the market failed to prevent metro Denver from having some of the sharpest rent increases in the country last year.
On the single-family side, builders are catering to higher-income buyers wanting larger homes, leaving the cupboards bare for entry-level buyers.
“New homes are too … expensive,” Eisenberg said.
A drop in oil and gas drilling and less inmigration could provide some relief. But Eisenberg expects wages will increase this year and next, resulting in more households forming and putting even more pressure on Denver’s housing supply.
Aldo Svaldi: 303-954-1410, asvaldi@denverpost.com or twitter.com/aldosvaldi