CHR’s 2016 Denver Real Estate Outlook

The 2015 Denver real estate market lived up to expectations with a 6.74% increased number of homes sold in 2014, totaling 59,624 and a single family home price value up by 11.23% with the average sales price of $398,044. Interest rates remained low with 30 year fixed rates hovering around the 4% range and with an increase of available mortgage products there has been continued upward pressure on prices through the $1,000,000 price range.

Over the last 3 years there has been an emergence of two distinct markets in Denver, homes priced below $550,000 and home prices above. On average, homes priced below $550,000 have been in a decidedly sellers’ market, receiving multiple offers in many cases and typically below 15 days on market. Homes priced above $550,000 have had a longer sales cycle, more inventory and fewer offers with as much as 9 months of inventory. Hyper local market conditions are important to note however as there is substantial variation in these statistics with some neighborhoods of $750,000 and above receiving multiple offers and other areas of $400,000 or less requiring more marketing time.

2016 is shaping up to be a similar year with a few variables of significance. Interest rates have remained low and to date the stock market appears to be enabling further downward pressure on rates as investors seek safe haven from market fluctuation by investing in bonds.

With an increase of apartment building over the past 36 months, we anticipate a number of rental properties to hit the market this coming spring. If this holds true, there will be downward pressure on rental rates and the lower price range home buyers will have a reasonable alternative to purchasing compared to the very competitive and cost prohibitive rental market today. As lower end home buyers choose to rent, the domino effect is a slight slowing of home sales and softening of appreciation.

This said, Colorado has one of the strongest and most diverse economies in the country and is one of the top, if not the top real estate market nationwide. While this information may scare some homebuyers away assuming this is a housing bubble, it is important to look at both objective and subjective factors.

While home prices have risen markedly, economist are now saying the Colorado market is appreciating and home purchases occurring based on wealth, not credit. The home buying affordability factor remains above 100 for Denver, meaning there is a comfortable continued room for appreciation relative to income levels. Colorado has also well positioned itself as the gateway from the west to east and east to west for many white collar industries from wealth management and alternative energies to health care and oil. The number of people moving to Colorado continues to drive upward pressure on home values and with only 3,500 homes below $585,000 currently available for sale, representing 3 weeks of inventory in that price range. A normalized market will have between 18,000 and 21,000 homes available for sale.

Expect another 9-12% appreciation in 2016, average home prices to hit the $450,000 range, inventory to remain markedly low and banks and builders to be bullish on housing starts. If you are a home buyer in the Denver market we remain confident in continued appreciation built on the most diverse number of factors ever seen supporting the Colorado economy.