The Denver metro's real estate market is one of the most compelling in the nation, and this year will prove telling about its future direction.

State of play: Just as the market thaws from its winter slumber, buyers and sellers will find the region sits at a confluence of trends that make this a volatile moment.

• Home prices are soaring, but homeowners are seeing big equity increases.
• The Denver area is one of the most unaffordable, but it's not necessarily on track to be the next San Francisco.
• And the lack of inventory is running up against rising interest rates.

What they're saying: "With the continued demand and lack of inventory, prices will increase and lead to another year of double-digit appreciation," predicted real estate agent Andrew Abrams in the metro realtors' latest trends report.

The big picture: Housing is a significant driver of inflation in Colorado, increasing 5% in the Denver metro, a new economic report states.

• And it's expected to continue contributing to the rise as strong demand persists in the next two years.

By the numbers: Colorado home prices increased an average of 20% in 2021, exceeding national rates.

• The fastest appreciation is visible in Pueblo (24%), Colorado Springs (22%) and Grand Junction (22%), as people look for alternatives to the expensive Denver metro.

What to watch: A decade of double-digit growth in home values is expected to slow as homebuilding increases and supply chains right themselves.

• Housing permits in the Denver metro grew 16% in 2021, according to census figures — the highest rate in five years — bringing more supply to the market.

The bottom line: "People from around the country continue to choose Colorado as a place to live," Michael Gifford, president of AGC Colorado, a trade group representing general contractors, told the Denver Post.

Real estate agents in Colorado and nationwide are beginning to cut words like "cozy" and "quirky," and calling properties what they really are: small and run-down.

Why it matters: The pandemic drove a surge of people to new places — many of whom purchased sight unseen — and thousands of new homebuyers say they now regret their decisions, the Wall Street Journal reported.

What's happening: A collection of realtors who recognize the problem are taking to YouTube and distinguishing themselves with a new genre of content in which they share painfully honest descriptions of listings.

Zoom in: Jamie Eklund, a real estate agent in northern Colorado, told the newspaper he's committed to being "as honest with people" as possible about each property, including its drawbacks.

• Greeley "smells like a farm town," he says in a video. "If this is something that might bother you, you might want to reconsider."
• Breckenridge lacks indoor activities, he advises in another. "If you're looking for concerts and inside venues, then [it] might not be for you."

What they're saying: People moving to new cities in the Centennial State appreciate the candor, including married retirees MJ and Gary Isaksen, who relocated to Greeley from Florida last year.

• "We have not had days where we said [the smell] was terrible," MJ said. "But we have had days where we'll go outside and say, 'Oh my.'"
• Snow must be in the forecast.

Median home values in Denver's hottest neighborhoods appreciated rapidly in 2021 — up to 30% year over year.

Here's where home values surged most, indicating insatiable demand:

• 80227 (Bear Creek, Bear Valley and Lakewood Estates)
• 80433 (Conifer)
• 80138 (East Parker, Canterberry and Ponderosa East)

Of note: Niche.com recently named suburb Holly Hills one of the best places to live in the U.S., and the No. 1 place to live in Denver.

• Cherry Creek, Superior, Inverness and North Park Hill were the state's other top five neighborhoods.

Realtor.com looked at search traffic in Q4 2021 to determine who from outside Denver is searching for a home in the metro area. 

Here are the top three cities our new neighbors are coming from, according to data shared with Axios:

• Atlanta
• Colorado Springs
• Seattle-Tacoma

What's happening: Colorado continues to draw people from across the country, particularly young people and tech employees who work remotely.

This beauty sits on two private acres in Golden at 1733 Montane Drive E.

What to know: It could be yours for a cool $7.5 million.

• The modern home was designed with tons of windows and glass walls to provide nearly panoramic Rocky Mountain views.
• At 10,000-plus square feet, there are six bedrooms and six bathrooms.

See more photos.