What Trends Are Ahead for the U.S. and Denver Housing Markets?

Are you looking at the Denver housing market as a first-time home buyer? Are you a seller looking for your next great opportunity to make a tidy profit? In either case, there are housing trends to be aware of.

Whether you’re buying your first home or selling your fifth, you’ll want to cast a watchful eye on trends – the current and future trends within the Denver housing market and across the U.S. as a whole.

The following article articulates trends ahead for the U.S. and Denver housing markets.

Background:

In recent years, Denver has consistently made the list of the country’s hottest markets and is projected to stay at the top in 2017. With a steady supply of millennial renters and strong employment across a range of industries, double-digit gains in house prices have been a standard for the past number of years.

Year-to-date, between 2012 and 2016, there has been a 33.2 percent bump in median home prices in the Denver area. See our chart below of median home sales increases as reported by Denver Metro Association of Realtors’ (DMAR) December 2016 market report.

The Real Estate Economics’ forecast is calling for a 5.4 percent gain in median house prices this year in metro Denver. That will be followed by a 2.8 percent increase in 2017, while 2018 will see a more modest 1.8 percent increase.

1. The Number of First-time Buyers Looks Set to Increase

Today, Metro Denver is majorly renter-occupied. In 2014, 37.8 percent leased rather than owned. Industries like energy extraction and aerospace have created high demand for housing in the area and this will continue through 2017.

In the coming years, Denver will have a generation of first-time buyers all looking to purchase their first home. In Denver, the median price of a one-bedroom rental is now $1,220, according to Zumper.com.

Buying a home for the first time is one of the most exciting moments in your life. Though, in a competitive market, where affordability is king, having the right real estate experts on your side you will be crucial. That is where Usaj Realty can help.

2. Low Inventory is an Issue

In this cycle, the Denver housing market is in transition. It’s moving from an undersupplied and undervalued housing market to an overvalued and undersupplied one.

The problem is in the supply. Many millennials are entering their peak buying time at a period when inventory is low.

As long as there is a limited supply in the residential market and above average population growth, Metro Denver homes will be in high demand, a major factor in increased prices. And, faced with the current inventory, construction activity will have to increase to meet demand.

According to DMAR, there has been a significant decrease in new residential listings from just a couple years ago. See the chart below which includes attached and detached single-family residences.

The Denver housing market will continue to remain competitive into the new year. But, by working with Usaj Realty, we go to work for you to find great value.

3. Retirees Hold the Aces

Denver may be a city that is home to a huge amount of millennials, but there is one group who will have a disproportionate influence on the Denver housing market in the years ahead.

Retirees.

Retirees who have property and want to sell are in a powerful position. If they look at economic forecasts and see trouble ahead, they can choose to sell. If they feel however that the market will hold its own they will hang on to what they have.

Uncertainty or volatility in the economy might make the decision easier for some retirees who find themselves rich in home equity but poor in savings.

Colorado and U.S. economies are expected to continue to expand according to a quarterly economic update from the Colorado Legislative Council released in September 2016.

4. The U.S. Market and Economy – Looking Strong

Many experts are predicting a strong 2017 in the U.S. housing market as a whole. The Federal Reserve has an optimistic view for economic growth as well. The Fed recently remarked they expect an economic growth of 1.9% for 2016 and 2.1% in 2017. Unemployment is currently at 4.6% in the U.S., the lowest it has been since the August 2007. Denver’s unemployment is even lower, at 2.9% as of November 2016, according to the Denver Business Journal.

Labor Force Statistics on Unemployment in the U.S. See more here.

The forecast is for existing home sales of between 6 million and 6.5 million in 2017. It’s also anticipated that new-home construction starts likely will increase up to approximately 1.5 million per year until 2024, according to Forisk Research. Denver looks like it will continue to one of the top four hottest markets, alongside Seattle, Portland, and Boston.

Projected risk factors for the nation’s economy in 2017 include restrained business investments, weak exports, low energy and agricultural prices, a stagnant global economy, and increased competition for employees. However, a strengthening of international economies and a gradual comeback for oil prices are projected to help these woes.

As for Colorado, things are looking good. According to the Colorado Legislative Council, “Ongoing growth has been sustained by healthy increases in consumer spending, as many households are reaping the benefits of a labor market at full employment.”

5. But, Where are All the Houses?

At a time when house prices are increasing, you would think that the supply of houses would quicken considerably.

The opposite appears to be happening, at least in the short-term.

Learning the lessons of the crash, homebuilders don’t want to be caught with excess supply. So, how do they respond?

They respond by being pragmatic and cautious. When profitability is the name of the game, market share becomes less of a strategy and low inventory becomes the top priority.

Coupled with this is the notion that homeowners in America are reluctant to sell their homes at the moment. This might be partly fueled by the fact that the options to buy are limited. Another indicator of a “hot” market has been the decline in the year-to-date days on market for residential properties in Denver as displayed by the graph below.

6.  Mortgage Rates Will Slowly but Deliberately Rise

A strengthening labor market nearing full employment and inflation moving toward targeted levels has just this week, prompted the Federal Reserve to approve its second rate increase in a decade and project to implement three more hikes in 2017. Three additional hikes are forecasted by policymakers for 2018 as well as 2019.

According to USA Today, the Fed has decided to “lift the benchmark federal funds rate – the rate banks charge each other for overnight loans — from 0.4% to 0.6%.” An expected move.

These changes will influence the rates of everything from home mortgages and auto loans to corporate bonds and bank savings rates.

Usaj Realty is proud to refer clients to reliable and expert lenders who can give you more detailed advice on rates and how it will affect you personally. They will help you navigate this portion of the home buying process and enable you to make the best decision possible.

Denver Housing Market – The Must-Have Info

Buying or selling a property is a huge decision. Before you make the jump, you need to acquire as much information as possible. And, while the real estate market is forever changing, there are some trends that can be forecast and predicted.

You’ve now got the full low-down on all of the trends in the Denver housing market and beyond and we are here for any further clarifying.