After several years of non-stop growth and skyrocketing home prices, 2018 brought us what was perceived as a slowdown with a mixed bag of theories on where the market was headed. It hasn’t just been home and condominium prices that have exploded over the last few years. Rentals, both homes and apartments, have kept pace making Denver a much more expensive place to live. The real estate market has been relatively easy to predict, with every year being a carbon copy of the last. So what does 2019 hold?
Changes in 2018
Even with some adjustments in the real estate market, Denver’s average detached home price still rose approximately 4.8% from 2017 levels. That, combined with rising interest rates, helped slow the pace of sales. There was speculation by some that we were coming to a big correction, a bursting bubble, but the prediction never played out. The ingredients simply aren’t there.
Yet even with increases in homes for sale, and longer durations of properties sitting on the market, the overall statistics were still well below what is considered the norm. In fact, some of the perceptions of a slowing market do not match the actual statistics. The market began to normalize in some price ranges from the frantic pace we have seen since 2013. Yet in the under $400,000 market, demand remained high.
Growth Keeps the Market Moving
In a recent article from Denver’s Channel 7, Colorado added another 80,000 residents between July 2017 and July 2018. Although the current 2.1% population growth rate doesn’t match the 13% rate we have seen in previous years, it provides the continued pressure to keep the real estate market strong.
In an interview with Garrett Townsend, Branch Manager at Cross Country Mortgage, Townsend said, “We are still adding new residents which keeps the demand high and market strong. With the higher prices in Denver, we are seeing more people moving south to Colorado Springs where the prices are lower and there is less competition.”
Not So Fast on That Price Increase
We expect to see the seasonal bump in home prices as we head into a new year. This January will be no exception. Penny Crook-Reynolds of Denver’s Canyon Title Company shared her thoughts on the coming year. “The big adjustment in the market will be the consumer’s perception on what their home is actually worth. Sellers will need to be more cognizant and measure the effects of price softening due to interest rate increases and more homes in inventory.”
The 2019 Crystal Ball
The changes we saw in 2018 in some ways were unexpected, but statistically they were bumps in the road. Rising interest rates accelerated sales early in the year, with the remaining months being a little slower. Some normalization of the market was good and the outlook of an all-out crash is unlikely. An increase in inventory provided more options for buyers, but the levels are still far from a normal market.
Expect 2019 to look similar to last year. Lawrence Yun, Chief Economist for the National Association of Realtors said in an article , “2017 was the best year for home sales in ten years, and 2018 is only down 1.5 percent year to date. Statistically, it is a mild twinge in the data and a very mild adjustment compared to the long-term growth we’ve been experiencing over the past few years”. Add to that the Fed doesn’t appear to be in a hurry to raise interest rates, as they balance a booming economy with the solid national housing market.
The increase in new residents coming to Colorado is slowing, which will ease some of the housing demand. This, combined with higher interest rates and rising home prices will force the market the slow some. A key factor in Denver is location. Geographically, hot markets will remain hot, while other neighborhoods and areas soften. Moving forward we will remain in a seller’s market without the no-holds-barred pricing from years past, but with more options for buyers to choose from.