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 the last year alone.
But a new forecast for the Denver real estate market through 2017 and into 2018 suggests that house values could slow down over the coming months. Call it a return to normalcy.
Denver Real Estate Forecast, 2017 to 2018
According to the real estate data company Zillow, the median home value in Denver rose by 10.2% over the last 12 months (as reported in May 2017). That’s well above the national average for annual price growth, going back 20 years or so.
But the Denver housing market could begin to cool over the next year and beyond, as far as home values go. Between now and May 2018, Zillow’s economists expect that house prices in the city will rise at a more “normal” pace.
In May, the company wrote: “The median home value in Denver is $377,500 … values have gone up 10.2% over the past year and Zillow predicts they will rise 3.3% within the next year.”
Normal 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 over the last year, are unusual. They’re also unsustainable over the long term, as they begin to cause affordability issues.
Zillow’s forecast for ~3.3% price growth over the next year suggests that the red-hot Denver real estate market could be settling down, following the double-digit gains seen over the last two 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 an industry-wide analysis, millennials accounted for 43% of all mortgage requests in Denver, between August 2016 and February 2017. A related survey 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 experts have forecast a strong real estate market in Denver for years to come.
Housing Market Inventory Remains Tight in Denver
Even though home prices are expected to rise more slowly in 2017 and 2018 (compared to the last couple of years), buyer demand will likely remain high for the foreseeable future. Buyers entering the market in 2017 should be prepared for some stiff competition.
Limited housing inventory is a factor in this market. According to an April 2017 report by Veros Real Estate Solutions, the supply of homes for sale in Denver was down to 1.2 months in the spring. Five to six months worth of supply is considered a “balanced” market. So it appears that sellers still have the advantage in the metro area.
To quote the Veros forecast: “This [tight supply] coupled with its modest unemployment rate of 2.8% and rapid population growth, makes Denver one of the strongest markets in the U.S.”
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. This is the overall forecast for the Denver real estate market in 2017 and into 2018.
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.