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Here's a look at what's been going on with Colorado real estate over the past month.

A Mini Bubble?

For the past couple years, there’s been talk that a housing bubble might be forming, but some say current market conditions are creating the ideal environment for the bubble to inflate.

There are several factors at work when a bubble develops—rapidly rising home prices that increase much faster than incomes and an abundance of listings and sales are two indicators of a potential bubble situation.

However, many economists believe other factors are driving up prices. Current homeowners aren’t selling, and strict lending practices implemented after the 2008 housing crash make it more difficult for buyers to secure a mortgage.

Appraisal & Price Mismatch

According to the Federal Reserve Bank, a real estate phenomenon is afoot along the Front Range: as home prices continue on their upward trend, appraisals are not keeping pace.

After making a bid, many buyers learn the property appraised for (often thousands of dollars) less than their offer. Conventional loans are determined by the appraisal, so the discrepancy makes buyers liable for the difference, in addition to a down payment, which forces many to walk away.

But don’t blame the appraisers. Often, even if they can demonstrate that the market is solid and values are legitimately increasing, underwriters are still hesitant to accept the higher appraisal.

High Prices…Still

Extremely low inventory is the main culprit driving up house prices and creating bidding wars that push them even higher. A balanced housing market has five to seven months of inventory; currently, metro Denver has an about one month. Since 2014, home prices have shot up 16.6 percent. According to the Colorado Association of Realtors, the average sale price of a single-family home sold in metro Denver last month was $414,632, topping $400,000 for the second consecutive month.

April 2015 was the first time the state ever saw an average price over $400,000. In the rest of the state, the average sale price still lingers just below that milestone at $377,778.

A Shortage of Affordable Homes

Colorado continues to see economic, employment and population growth, bringing more consumers to the already sparse market. With the average home price now teetering around $400,000, homes under $300,000 are in short supply, making it extra difficult and frustrating for first-time homebuyers and those with smaller budgets.

Most homeowners sell to upgrade or downsize, but right now they are just staying put. Many are unsure they will be able to find another home with such low inventory and high prices. Others are waiting to recoup the value of their home lost in the housing crash of 2008.

These are exciting times in Colorado's housing market. Buying a home may be a bit more challenging, but it is still possible to find your dream home with the right support. It's never been more important to have an experienced, locally-focused real estate agent to help you through the process. If you want to buy or sell a home in Colorado, contact us to learn more about how we can help.

COListings.com is a Colorado Real Estate Search Engine and home of the best Colorado Realtors® in the state. If you are ready to buy or sell a home in Colorado then you are in the right place.

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