The Denver real estate market completed another banner year in 2016, with ongoing demand, short supplies and rising prices. A repeat performance of 2015, the year was busy and competitive, with an explosion of new building throughout the metro area. Will Denver real estate in 2017 complete the hat-trick of banner real estate growth?
What’s Driven the Market?
Much of the Denver real estate boom has been driven by the population growth over the last few years. Compared to the coasts, Denver is affordable and a desirable place to live. Tech and finance industries continue to move in, bringing jobs and people. Add the legalization of marijuana which has further increased the population and created whole new industries with more jobs, and the need for more people
Real estate is one of the best examples of supply and demand in motion. As the population in Denver and Colorado has continued to increase at a pace beyond the ability for builders to fill the needs, costs and competition have gone up sharply.
What May Change in 2017
There are several factors that we could see in the coming year that could slow the real estate market down. The legalization of marijuana brought a wave of people to Colorado when the law passed four years ago. Today, there are 26 states that now have some form of legal marijuana. Legalization across the country will reduce the migration to our state, easing the demand for housing.
Now that we are past the tumultuous presidential election, financial markets are on an upward trajectory, toying with record numbers. We have also seen large auto manufacturers commit to bringing industry and jobs back to places like Michigan. The revitalization of other areas of the country will divert people coming to Colorado for other states. As more states begin to develop their own marijuana industries, we could see some migration away from our state to help develop other areas.
Interest Rates Go Up
The optimism in the markets, combined with lower unemployment and higher inflation, has brought our first interest rate hike in what could be a series of them in 2017. It is possible we could see up to three increases in the coming months. Of all the factors, this has a faster impact on our market. With an increase in interest rates, monthly mortgage payments increase as well. Buyers who can’t afford the additional cost of the payment are immediately out of the pool of home buyers.
Home builders are constructing new homes, condominiums and apartments from Fort Collins to Colorado Springs. As they continue to catch up, we will see demand begin to shift as more people are able to find housing. While a drop in overall pricing is unlikely, the cost of housing should continue to level out.
The changes ahead will not cause the real estate market to shift over night. This new year will very likely look much like the last two, but probably not as competitive. But with that said, the current market, even in the traditionally slow months of December and January, is still sizzling. Depending on the area and price range, sellers continue to get multiple offers on their properties and go under contract in just a couple days after listing. For those wanting to sell, 2017 will possibly be the best year to do it. For those wanting to buy, it will be a year shifting to a more normalized market with more options and opportunities.