Denver Real Estate Recap for the New Year!

As we begin the new year, it’s a great time to review what the real estate market in the Denver area experienced in 2018 and where we think it will head in 2019. How do we feel about the past year? How do we feel about the future? Here are a few different metrics that we use to evaluate the market and help you understand it better:

Market Strength

As you can see from this graph, inventory levels are historically low. It took several years for the inventory to get this tight; it will take several years for inventory to build back up to historically “normal” levels. If inventory continues to rise, which we believe it slowly will, then it will likely be easier to sell now than in the future. When we look at Months of Inventory (MOI), which is the metric telling us whether it's a buyer or seller's market, we clearly see that we are still very much in a seller's market (less than 6 MOI). See the chart below from the Denver Metro Association of Realtor's Market Trends Committee report (of which I'm a member):

Interest Rates

No one knows exactly what interest rates will do in the future, but our best guess is that they may rise a little in 2019. The Federal Reserve is expected to raise short term rates during 2019 as a natural response to the current strength of the economy. However, even if the Fed raises rates, that does not directly affect the 30-year home buyer interest rate you are most concerned with as a buyer or seller. Long-term interest rates, affected by the bond market, are unpredictable. That being said, home-buyer interest rates are still held at historically low rates and are unlikely to fall any further.

The Economy

The Denver economy is quite strong right now, and is predicted to carry the momentum into 2019. The state of Colorado is on track to add 65,000 jobs this year (a growth rate of 2.4%), and currently has one of the lowest unemployment rates of any of the states. This is connected to our high net migration rates, with around 53,000 people being added this year. In 2019, we are expecting the economy to grow about 2.7% and for net migration to rise again by about 50,000 people. We anticipate the economy to continue to grow, but at a slightly slower pace than we saw this past year. I'll be attending an Economic Summit here in Denver this week to learn more about local economic conditions. I'll let you know what I learn!

Housing Inventory

For the past several years, we have had record low housing inventory in Denver (as you've probably read in my monthly articles many times!). However, it is nice to see that in the last few months we have begun to see that slow bump in inventory beginning to happen! November showed a 38% increase in active listings from the previous year, with 7,069 houses on the market. In December, we saw an even more dramatic increase - a 44% increase year over year!

Homes in good condition that are priced correctly are still selling faster than the historical average. However, as demonstrated by the chart below, the number of sold listings has decreased by 16.8% from November of last year, with 3,831 homes sold in the metro Denver area. Based on how the last few months have gone, we expect inventory to continue to increase in 2019.

Rental Vacancies

The rental market remains super strong. The vacancy rate for 1-8 unit properties currently has the lowest vacancy rate at 2.6%. Rents are rising quickly, with the average rent increasing by 3.7% since this time last year. As a result of rising rents, we are seeing some renters deciding that it’s time to buy instead of suffering through additional rent increases and tougher application processes.

The economy is always unpredictable, but we are able to make highly informed assumptions on what may happen based on the past. Overall, we are very optimistic about the Denver real estate market for 2019.

Thanks for taking the time to catch up on our Denver area real estate market. If you have any questions or concerns about buying or selling a home in the near future, give me a call. I’d love to help you navigate the right move for you in our current market!

With gratitude,

Drew Morris

303-929-7844

[email protected]