And a Look Ahead to a More Balanced Market in 2016
Fueled by the low housing inventory and continued population growth, the Denver real estate market experienced another strong year of price appreciation. In January 2015, Denver was on Forbes Magazine’s list of the Top 10 Fastest-Growing Cities. After averaging an annual appreciation rate of nearly 12% since 2012, local and national economists project that our market will continue to experience positive appreciation in the 5% to 8% range through 2018, before we shift to a more historical appreciation rate of 3% to 5% in the subsequent years.
Colorado is a great place to live: migration to our state is strong and anticipated to stay robust long into the future. The population across the Front Range is expected to increase 87% by the year 2050! This is because Colorado has become a destination state, with companies across many sectors choosing to make Denver home for their major operations. From Arrow Electronics to Charles Schwab, Lockheed-Martin, Western Union, CenturyLink, Dish Network and many others, there is no longer one industry supporting our local economy. New industries bring new jobs, which leads to local hiring and relocation, adding to the demand for housing. The lack of inventory has also driven down rental vacancy rates to an all-time low, and caused rental rates to skyrocket, outpacing the cost of home ownership. As rental rates continue to climb, renters will have to turn into buyers to continue to afford housing, which will continue to add demand to the housing market and drive up pricing. As more apartments are built to house renters, the demand will start to lessen, which will help to stabilize our market and bring it more into balance.
For the past three years, Denver’s inventory of homes for sale has been significantly low and continued to fuel a heightened appreciation rate. A balanced market has approximately 16,000 homes on the market at any given time. This number is in stark contrast to the 5,683 homes on the market at the end of November 2015. As a point of reference, during the height of the recession eight years ago, our inventory exceeded 37,000 homes—more than six times what we have now! Slowly but surely, our current overall inventory is increasing, which is signaling a slower growth for the coming year. Our November inventory was 30% more than last year, but still only represents slightly more than a third of the inventory needed for us to have a balanced market. Until our inventory approaches the benchmark of 16,000 homes, we will continue to experience a seller’s market.
We expect to see continued appreciation through the spring, and an easing into the summer and through the fall. Mortgage rates will start to creep up, but should move nominally through 2016, at a rate that will minimally impact buying power, and have little impact on demand.
In this competitive market, there are three key factors to a successful home sale and/or purchase: preparation, diligence and experience, on your part and your Realtor’s. You have to be partnered with a seasoned advocate, willing to work hard and be tenacious. There are opportunities to be had and The Steller Group would be delighted to help you find them!
Contact us at 303.539.5228 or Info@StellerRealEstate.com