As we head into another year, Denver real estate continues its long run of rising values in a seller’s market. In 2018 we saw a shift in demand, taking us out of the white-hot selling frenzy we experienced from 2014 to 2017, and moving into a slower paced sales cycle. This past year the market retained its strength and momentum, leaving us with solid sales and another round of increased home values. As we move into 2020, will Denver real estate stay the same course?
There are many factors that come into play when looking at the health and activity levels in Denver real estate. Population growth is possibly the biggest factor in determining home prices and the number of annual sales. More people coming into the state means supply and demand is the driving force behind the market’s continued activity. Judging by the amount of traffic, Denver residents know all too well it’s been another year of growth.
World Population Review reports Colorado added an additional 75,000 residents in 2019, a 1.34% increase from the prior year. This is a net population increase despite people and businesses leaving the state citing escalating costs as the significant factor for their move. Colorado’s population growth is expected to continue, taking the state to 6 million residents in the near future.
Interest Rates – How Low Can You Go?
Interest rates have been bouncing around all-time lows for more than a couple of years, and even when it looks like they are about to go up, the Fed quickly pushes them back down. Interest rates won’t make or break sales levels through the coming year. While lower rates can help a buyer’s purchasing power, especially as prices continue to rise, the rates are so low that even a mild tick upwards doesn’t create dramatic changes.
If rates go lower, which there has been some speculation they would, the result would likely be more refinance activity, and not push more home sales. There are other factors like population growth and overall economic factors that have a much larger impact on the market.
The Economy Keeps Booming
Although our leaders in Washington can’t seem to agree on anything, politics aside, the economy remains strong. A CNN poll in December showed 76% of Americans believed the economy was either “somewhat” or “very” good. The positive sentiment was reflected through consumer spending this holiday season. Barrons reported “Overall sales increased 3.4% from 2018, even though the traditional holiday shopping season was six days shorter this year.”
As long as homebuyers feel secure in the economy and the likelihood their jobs will remain stable, the market will continue to remain solid. Sellers will continue to maintain control, still sparking bidding wars in certain locations and price ranges. Buyers have made some headway and gained some control over the process. In general they have time to consider making an offer on a home without facing overwhelming competition.
The Inevitable Downturn – Colorado’s Insulating Factor
The economy and housing markets are cyclical, and the one sure thing about the current market is it will eventually change. There are a couple of reasons Denver has advantages over other states that should lessen and delay the effects of an inevitable economic downturn.
First, people want to live in Colorado. Denver is a great place to live and remains one of the top metropolitan areas in the country. As long as people continue to move in from other states, the demand for housing will remain strong. Plus there is a lot of room for growth. Colorado’s current population equates to 56 people per square mile. By comparison California has 255 people per square mile with New York coming in at 415.
Second, although the cost of living has increased and home prices continue on an upward trend, prices on the east and west coasts still make Colorado an affordable destination. When the economy makes a shift, Denver will likely feel the impact to a lesser degree. People will continue to move in from other states, seeking a lower cost of living and keeping pressure on the demand for housing and other local services.
The elections may cause some stir, but don’t expect anything drastic. Washington’s political craziness in December had little effect on Denver home buyers. With sales of 4,092 single family homes at a median price of $435,000, this was the biggest December since the last recession.
The crystal ball is never one hundred percent. Catastrophes, both natural and man-made could easily de-rail the Denver housing market. But on the current path, looking ahead into 2020, the year looks steady. There will be a continued shift towards a buyer’s market as new home builders continue to catch up with demand. In 2020 expect to see sellers maintain control but they will find buyers throwing a little more weight around in negotiations.