Housing markets show continued signs of strengthening according to reports released on Wednesday. The National Association of RealtorsÂ® reported that sales of pre-owned homes rose to 5.49 million in June as compared to Mayâs revised reading of 5.32 million pre-owned homes sold and expected sales estimated at 5.42 million sales. Expectations were based on Mayâs original reading of 5.35 million sales. Juneâs reading was the highest since February of 2007. Readings for existing home sales are calculated on a seasonally adjusted annual basis.
summary: The real estate market in Denver has seen healthy gains in recent years. However, the market has started to cool down, and the pace of growth has recently slowed. Over the next 12 months, the rate of growth is projected to be around 0.5%. Nevertheless, the level of competition in Denver is still expected to be reasonably high given current demand and inventory.
Over the last few years, home prices in Denver rose steadily and significantly, outpacing the national average. The median home value has increased by double digits in 2016 alone.
But a new forecast for the Denver real estate market through 2019 and into 2020 suggests that median home value growth could slow down over the coming months. Call it a return to normalcy.
Denver Real Estate Forecast, 2019 to 2020
According to the real estate data company Zillow, the median home value in Denver rose by 2.8% over the last 12 months (as reported in April 2019). That’s more or less consistent with the national average for annual price growth, going back 20 years or so.
And Zillow also predicts that the pace of growth will slow down a bit further over the course of the next 12 month period. Between now and April 2020, Zillow’s economists expect that house prices in the city will rise by a rate of just 0.5%, which is a bit lower than the national average.
In April, the company wrote: “The median home value in Denver is $424,700. Denver home values have gone up 2.8% over the past year and Zillow predicts they will rise 0.5% within the next year.”
Related: Renting versus buying in Denver
Slow Price Growth Ahead?
With housing bubbles aside, home prices in the U.S. tend to rise by around 3% to 4% annually. Double-digit annual increases, like those seen in the Denver real estate market in recent prior years, are unusual. They’re also unsustainable over the long term, as they begin to cause affordability issues.
Zillow’s forecast for ~0.5% price growth over the next year suggests that the formerly red-hot Denver real estate market could be entering a new phase of much slower growth, following the double-digit gains seen in prior years. Some analysts have referred to this as a “high plateau.”
Millennial Home Buyers Boost Demand Amid Inventory Crunch
The population of Denver has grown steadily since the 1990s, and this increases demand for housing. The city is particularly attractive to millennials (ages 18 – 34) who are relocating from elsewhere in the country.
According to a LendingTree report, millennials accounted for 45% of all mortgage requests in Denver, between January 2018 and November 2018. Another survey, this one conducted by the Mayflower moving company, revealed that Denver was one of the top ten destinations for millennials who are planning a move.
These migration and home buying patterns are partly why the Denver real estate market has shown healthy gains in recent years. But, as we’ve said, high growth is hard to sustain over the long run, and so now we’re starting to see a slower rate of growth.
Housing Market Inventory Remains Tight in Denver
Even though home prices are expected to rise more slowly in 2019 and 2020 (compared to previous years), buyer demand will likely remain high for the foreseeable future. Buyers entering the market in 2019 should be prepared for a fair level of competition.
Limited housing inventory is a factor in this market. According to a recent local news source in Denver, the supply of homes in Denver has increased, but the market is still quite competitive. In February 2019, buyers in the Denver area had their choice between over 6,000 active listings. That’s an increase of 2.31% in January 2019 and a whopping 47.33% higher than in February 2018. But the supply is still relatively tight considering the level of demand. Demand in Denver continues to be relatively high, and so this has balanced out the increases in supply which we’ve recently seen.
Bottom line: Home prices in Denver will probably rise more slowly over the next couple of years because, frankly, they have to slow down. But the local real estate market will remain very active due to high employment and housing demand. Limited inventory will have buyers competing for desirable homes. Buyers have more choices, but the demand is still high and so competition will still be fairly strong. This is the overall forecast for the Denver real estate market in 2019 and into 2020.
Disclaimer: This article contains predictions and projections from third parties not associated with our company. We have compiled them here as an educational service to our readers.
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