Attached properties in the Denver Metro area have officially made their comback, showing a 17% increase year-over-year and joiningdetached homes which have been in the double digits since last August. When Denver home prices experience a rapid surge like this, bubble talk starts to surface, stirring up anxiety for area homeowners over fear of an impending market crash that could vaporize the equity in their home. In fact, the google search for "when is the housing market going to crash" is up 2,450%! The short answer is œnot in the foreseeable future, but since it's on your mind, let's explore it further.
Denver Housing Market Stability
The conditions that existed before the housing crash in 2008 just don't exist in our current market. The average homeowner in the US has over 60% equity in their home as opposed to many homeowners who were œupside down on their biggest investment back in 2008, owing more to the bank than their home was worth due to risky lending practices and high interest rates. Homeowners who found themselves in financial trouble were forced to sell for less than what they owed or go into foreclosure. Denver has had healthy apprecation for over a decade and lenders have tightenedtheir qualifications, so homeowners experiencing financial distress today are actually able to use their home to help them out of their troubling circumstances. Able to sell their home for considerble profit, they can use the released equity to get back on track with their finances.
The Disparity Between Supply and Demand
Another reason to curb any concerns regarding a market crash is that we are grossly undersupplied when it comes to housing inventory. Builders, who were already doing a poor job of keeping up with demand, are experiencing spikes in material costs that are making it cost prohibitive to buildaffordable homes. Home tenure is also up and will likely continue to rise due to the gift of low interest rates this past year that will lock homeowners in for years to come. In addition to all of that, we've got the largest group of millennials entering the housing market which will keep demand sky high.
It will take years to dig out of the current inventory crisis. If and when we return to a more sustainable level of supply and demand, we will likely see appreciation level off or return to more normal rates. It's highly unlikely that home values will crash. We hope that gives you some confidence in your home investment. Check back next month to see if the Memorial Day trend holds true this year.
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