The Denver real estate market continued its hot streak in 2017! With listings down, and demand continuing to grow, what does 2018 have in store for home buying and selling in Colorado? Our 2018 Denver real estate market prediction, based on a year’s worth of real estate data, provides some insight…
2017 was an extremely strong seller’s market (as was 2012 – 2016!). The market strength peaked in the spring when the bottom dropped out of our inventory and multiple offers were the norm, not the exception. We expect 2018 to continue to be a seller’s market but see no sign of a major imbalance that could lead to any sort of ugly peak and crash.
To see 2017 residential real estate market data for Denver at a glance, click below to download our infographic.
For the past several years we have had record low inventory in metro Denver with absolutely no sign of it increasing. Until it does, there will continue to be tremendous upward pressure on prices as demand continues to outstrip supply. Where will the new supply of home inventory come from? It won’t be bank-owned properties or short-sales – our metro Denver economy is as strong as it’s ever been and a better economy means fewer distressed properties. The additional supply will eventually come from homeowners who finally decide to put their home up for sale and move. But when this will happen is anyone’s guess.
Let’s talk a bit more about the economy. The metro Denver economy is very strong which has a lot to do with our terrific real estate market. The unemployment rate is extremely low, below 3 percent. Inflation is expected to stay in the range of 1-2 percent, our population is rising at a rate of 50,000 people/year and consumer confidence continues to rise. Nothing can be better for the housing market than a strong and steady economy.
No one knows exactly what interest rates will do in the future, but my best guess is that they may rise a little in 2018, but only a little. Remember that the Federal Reserve has control over only short-term, not long-term interest rates. Even if the Fed raises rates, that doesn’t directly affect the 30-year home buyer interest rate you are most concerned with as a buyer or seller. Long-term interest rates are affected by the bond market (as bond prices decrease, interest rates increase) which, frankly, is not predictable. Understand, though, that interest rates are at near 50-year lows so they are highly unlikely to fall any further. All we know for sure is that someday they will go up.
The rental market remains super strong. The vacancy rate for 1-4 unit properties is still under 4 percent. Rents are rising faster than ever, over 40 percent in the past five years! As a result of the 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. In addition, more and more homeowners who experienced hardships during the downturn (who lost their homes and have been renting ever since) are now able to purchase a home again as their ability to finance a purchase recovers. This dynamic should continue to support the housing market, lead to more sales in 2018, and continue to support our seller’s market.