Denver home prices have increased for more than two years, and continue to rise. The Colorado Front Range has seen a general, overall increase in value, which is now being reflected in rising property taxes. In some areas the increases have been dramatic over multiple years.
The median price for a single family home in January 2015 was $310,000. In April 2017 the median price for the same home is over $403,000, a 30% increase in price.
In 2016, the real estate crystal ball showed an expectation of continued, but mild increases through 2017. But an all-time low home inventory in the first quarter, coupled with continued population growth kept competition and housing prices high.
Jim Brown: We hear over and over that people think we are in another real estate bubble. How do you think this market plays out over the next couple of years and is there a bubble that will burst?
Curt Lundberg: Denver has enjoyed one of the most robust real estate markets in the US for the last few years. This has been fueled by the incredible growth of new quality jobs in the Denver area as well as other factors drawing in newcomers every day. That said, double digit home appreciation for multiple years will typically cause a bubble – the question really is – when?
As long as the jobs continue to come it is hard to imagine much of a slow down in home values. In March we had the lowest home inventory in recent history causing prices to spike even higher and the bulk of homes were sold at or even well above asking price – with the average time on market at only 5 days!
Jim Brown: How does new construction play into the current market?
Curt Lundberg: The other interesting change compared to past growth spurts is that the Denver area (inside the beltway) is almost built out. This means most new home communities are only available further away from ‘the action’ and the cost and time to complete new homes is driving the price well above what many ‘new buyers’ can afford. This puts most existing homes in town in a very desirous position … fueling the current Seller’s Market.
Jim Brown: I have heard of timelines from 24 to 36 months of the current seller’s market. What do you think changes to take us out of this market, and when?
Curt Lundberg: For the Seller’s market to ‘end’ the obvious answer will be fewer buyers in the market. But, for now, as new buyers continue to come to our market this will continue to put pressure on our low inventory of available homes. We have also had a lot of investors buying in recent years taking advantage of rising rents. We are seeing signs of more rental inventory coming into the market which should slow down the investor market as rental options grow.
The biggest piece of the puzzle will likely be job growth. Will the Denver market become too expensive for companies to relocate here? Based on the markets like San Francisco and Seattle we still have a long way to go, or “grow” here.
Jim Brown: Will interest rates have any effect on our market, short or long term?
Curt Lundberg: Fortunately for us in Denver, interest rates are essentially the same nationally and not driven by a ‘hot market’. The FED and powers that be have been trying to make a case for higher rates for the last 4 years and here we are with rates still in the low four percents.
Unless the national economy starts to take some real strides forward the government seems content to appease the markets with small rate increases – many of which have rolled back over the following months. If rates started creeping above 5 to 5.5%, we would see some reaction, but I think this would be much worse on the national market than the Denver market.
The outlook for Denver real estate appears to stay the same for the next two to three years. The continued population growth and lack of inventory can only mean higher prices in the future. As Curt Lundberg sees it, Denver has all the ingredients to keep pushing prices higher.
is a Realtor® and writer in Denver, Colorado. He advises and mentors real estate agents to help them succeed and grow their real estate business. www.JimBrown.me