What will the Denver Real Estate market do in 2016? Every year about this time, I collect all the data I can, read every article I can find about the Denver market the year before and predictions for the following year, poll all the agents I know, and then try my very best to predict what will happen with the market that year.
For 2016, I fully expect that the Denver Real Estate Market will be bullish once again. All the major Real Estate researcher companieswith people much smarter than myself predict that Denver will be the top Real Estate market in the country in 2016. According to Clear Capital's Home Data Index, the Denver Metro area is expected to see 7.7% appreciation in 2016 which will be highest in the nation, just down from 11.7% we saw in 2015.
This makes me ask two questions. First, what will cause prices to increase so drastically again and second, why will it be down from last year? The number one reason for this sharp increase in home values we keep seeing is of course the huge number of people moving to Denver. Colorado added just over 100,000 people last year making it the second fastest growing state behind North Dakota.
When this many people move to one destination, it creates a major shortage of homes available. According to the Census Bureau, in 2015 there were 45,300 new households in the state and only 25,000 new housing units added. Since 2007, new households have outpaced housing units built by 128,000! Let that sink in for a minute and then you will understand why there is such a high demand for housing in Denver and why prices continue to soar.
In the next 10 years the population of Colorado is expected to increase by 2.3 million people with half of those moving to the Denver Metro area. There will need to be a lot of housing units added to accomodate this influx of new residents so I don't see this trend slowing down anytime soon, especially for urban neighborhoods. You've likely noticed traffic increase substantially the past few years and even with light rail being added, that isn't going to change. So closer in neighborhoods will continue to be highly desirable and I expect the highest appreciation levels from neighborhoods within a 20-30 minute commute from Downtown.
So with these shocking numbers about growth, why won't appreciation be what it was last year? I believe it's because we are reaching a point where homes are starting to be priced higher than some people can afford. It's still cheaper to own than rent in Denver but with rising interest rates, some buyers are definitely getting priced out of the market as you can see from the great chart below courtesy of Megan Aller with Land Title.
The question I get a lot now is if we are going to see bubble burst soon and if prices are going to collapse? As long as people keep buying because they have the means to do so, good income, good jobs, strong downpayment, and not because of easy credit, then we know this market is strong and here to stay for awhile. Credit has not become easier to get in the past 5 years and the buyers buying now should be buying, unlike the last crash when anyone could get a loan. I feel very confident this market will stay hot for at least next the next 5 to 10 years. It really comes down to the simple fact that Denver is a bad ass place to live and the secret is finally out.
Of course I've never been 100% correct with my predictions, but I have come close and received an incredible compliment just a few weeks ago about my predictions. I received a referral from a buyer I had tried to help 4 years back. This buyer has been referring everyone he knows to me lately because he said my predictions back then have all come to fruition and if he had listened to me, he would have made a ton of money. It's nice to know that the homework and research I do pays off and hopefully it can help more potential buyers and sellers in the future.
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