Denver’s fiery streak of home sales over the last handful of years may be in jeopardy of slowing to a trot in the coming years. Listings remain scarce and buyers remain interested, so what could the culprit be? Our Colorado housing market predictions are a bit surprising:
It’s not even related to real estate…
The factor that may put the breaks on the booming Denver real estate market is not the amount of listings or a slowing of new residents moving to The Mile High City – the one thing that threatens the record increase in home prices is Colorado’s slow wage growth.
A look at the numbers
According to The Denver Post, wages lag behind inflation by over .5%, despite extremely low unemployment rates. What’s more impactful to the real estate market; the home price increase far outpaces the wage increase in our state. In fact, in a year over comparison, home prices increased by 9% while wages increased by only 3%.
Denver home affordability
In effect, Denver’s lagging wage increases have created a situation where only 32% of Denver residents can afford to own a home in Denver, whereas a healthy market would boast a 50% affordability rate.
Colorado housing market predictions
Eventually, this affordability gap should slow home-buying interest, balancing the low levels of new homes on the market we’ve seen. If less residents can afford to buy, the sellers market will slowly pump the breaks – creating less multiple offer situations and placing a damper on skyrocketing home prices.
No, there’s still no bubble
Take our Colorado housing market predictions with a grain of salt – no one can see the future. But to be clear, we don’t see the slow wage growth creating a real estate bubble burst. Colorado’s popularity and stable economy should prevent such an occurrence. The lagging wage growth should simply and slowly balance the market, given that the last few years have seen minimal listings and ample buyers. Perhaps as we head into 2020 and beyond, the Denver real estate market will balance, with home equity increasing at rates closer to historical averages, rather than creating monthly record-breaking highs.
Looking for more information on the Colorado real estate market? Download our Infographic Booklet for the latest local housing trends.