Price gains flattened and the inventory of homes available for sale continued to rise in May, early signs that the gravity of higher mortgage rates might be finally starting to pull metro Denver’s housing market back to earth, according to a monthly update from the Denver Metro Association of Realtors.

There were 3,652 homes and condos available for sale at the end of May in metro Denver, which is 14% more than the number available at the end of April. More noticeable, the inventory was 76% higher than at the end of May in 2021, when the market was starved for supply.

The inventory of single-family homes available was 111.6% higher than a year ago, while the inventory of condos and townhomes was up 11.5%, an indication that higher prices are pushing buyers more toward more affordable attached housing options.

“Buyers have become more patient in their approach as the cost of money has become more expensive,” Andrew Abrams, chairman of the DMAR Market Trends Committee in comments accompanying the report. “Likewise, sellers are having to realign their expectations to sell their properties.”

Rates on a 30-year conventional mortgage have moved from around 3% at the start of the year to above 5%, according to FreddieMac. Abrams predicts the full impact of higher interest rates, however, likely won’t emerge until after the summer, and that the housing market will be a story of “two halves.”

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The second half of the year will have lower inventory, lower or flat prices and longer stays on the MLS or multiple listing service. But the lack of inventory and strong demand from buyers continues to support the market for now. The question is for how long.

The median price for single-family homes sold in May was $670,106, which was down 1.5% from April, while the median price for condos and townhomes was $430,000, a decrease of 2.27%. Median prices are about $10,000 below where they were in April.

Homes are still moving quickly, spending an average of nine days on the market before they go under contract, and the inventory remains tight compared to the historical average of 15,199 listings available at the end of May going back to 1985.

Although homes continue on the whole to sell above their list price, more sellers are having to drop their asking price to get a sale, according to an analysis from Redfin. About 17.3% of sellers in metro Denver provided a price cut in April 2021, but 26% did this April. For anyone seriously looking to sell, now is the time to act, the Seattle-based brokerage advised.

“We don’t expect prices to fall lower than they were a year ago, but price growth will likely slow as the year goes on,” said Redfin Chief Economist Daryl Fairweather in a press release Thursday. “Sellers should list their home as soon as they reasonably can.”

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