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A Look at Denver’s Housing Market, Should We Brace for Impact?

Homeowners who have been in the long-term rental gig for a while will agree with me that they made a killing in the last decade, especially those in Denver, Colorado. Zillow recently reported that rent in Denver increased by a whopping 88.2% between 2010 and 2019.

This report analyzed trends in rent for 50 largest metros in the U.S. for the last 10 years. From the report, Denver came in at number three with a 3.4% year-over-year rent increase rates after Austin, Texas, and Raleigh, North Carolina.

Even though the report shows that rent increased nationwide by a 2.3% margin, this trend slowed down a bit in the latter years of the decade. To be exact, renters spent $4.5 trillion in 2010 and about $512 billion in 2019.

Despite the housing market being shifty, demand for long-term rentalswould always remain constant. This means that owning a property is one of the surest investment decisions you might ever make.

To back this, millennials now make the largest sum of our population and trends show that most of them prefer renting to buying. This forecast is in favor of the demand for single-family homes.

 

The Twenty-Twenty Market

Considering the COVID-19 pandemic and a possible recession, one model predicts that the real estate market for residential housing could count 2020 as a lost year. It further cautions that if you are looking to either buy or sell a home, you should at least buckle up for a murky ride in the coming months until next spring when things might just start getting back to normal.

This model predicts a “W” shaped housing market recovery with a sharp drop this spring, a possible rebound in summer, another drop in fall, and a solid increase in spring next year. This has made housing markets for several large metropolitan areas like Denver to brace for sales declines in the months ahead.

The Denver Metro Association of Realtors recorded a 5.2% drop in property sales in Denver and an 8.5% drop throughout the U.S. in March. Working models further predict a 24.1% year-over-year home sales decline through July in Denver alone.

Experts are associating this wane with the coronavirus outbreak. Now that joblessness is rising past 11% nationwide, they further warn that we should expect more similar interruptions in the coming months.

Recent reports indicate that COVID-19 would last for a while longer andwe all should prepare for subsequent waves and impacts in its wake. Such trends have been taken into consideration by the W shaped model.

 

Will Prices Be Shaken Too?

Despite the sharp fluctuations in the real estate market, prices in Denver are expected not to move much. Experts have argued that the local market might see reduced market activities with no significant price readjustments. Sellers are more likely to remove their homes from listings if they will not get an offer that matches what they want.

Even though homeowners could be having large home equity values while holding a 3% mortgage rate, the model cautions that home prices in Denver might turn negative this July, and its decline could continue until February next year.

It further predicts that the worst decline might occur in October this year and would run at a 1.2% rate.

The unemployment rate in the U.S. continues to increase towards the 20% mark. Multi-families are more affected by this rate compared to single-families. In relation to the housing market, this rate is hurting their purchasing power and therefore subjecting most of them to be renters than owners.

Many homeowners are now turning to forbearance, which forestalls major contributing factors to price declines. Households that opt to stay current in this period only have one chance to keep their financial position afloat. That is through refinancing.

 

Denver’s Survivability

Unlike other metropolitan areas that largely depend on sectors that have been impacted by the outbreak such as tourism, Denver might not get off scot-free, but home prices should not be affected negatively too much.

The one area that is likely to suffer is the new home construction where more than half of its permits are now cut down since June. This negative year-over-year trend is predicted to continue until February 2021, and it could consequently be problematic.

Despite the heavily reduced mortgage purchase power, mortgage refinancing is expected to be more intense between July and August. Thanks to the intervention by the Federal Reserve.

 

 

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