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2018-10-01 — nytimes.com

By nearly any measure, this city is booming. The unemployment rate is below 3 percent. There is so much construction that a local newspaper started a "crane watch" feature. Seemingly every week brings headlines about companies bringing high-paying jobs to the area.

Yet, Denver's once-soaring housing market has run into turbulence. Sales and construction activity have slowed in recent months. Houses that would once have drawn a frenzy of offers are sitting on the market for days or weeks. Selling prices are rising more slowly, and asking prices are being slashed to attract buyers.

Similar slowdowns have hit New York, Seattle and even San Francisco, cities that until recently ranked among the nation's hottest housing markets. The specifics vary, but economists, real estate agents and home builders say the core issue is the same: Home buyers are reaching a breaking point after years of breakneck price increases that far exceeded income gains.

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The recent slowdown, however, is unlikely to give would-be buyers... much relief. Prices in Denver are still up 8 percent over the past year, according to the S&P Case-Shiller index. That's cool compared to the double-digit gains of a couple years ago, but well ahead of the 6 percent increase in average hourly earnings over the same period. Rising interest rates have also made buying homes more expensive.

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Over all, however, the housing market is not behaving as the textbooks say it should. Inventories remain low despite the recent increases, and new construction is slowing, not picking up.

Part of the problem, local real estate agents say, is that the furious pace of price growth has essentially gummed up the market, making homeowners reluctant to sell for fear of being unable to find a new home.

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Rising interest rates are compounding the problem because would-be sellers do not want to give up their low interest rates, a phenomenon economists call the lock-in effect.

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