Many different economic and demographic factors impact the health of our real estate market; Interest rates, supply and demand, employment, population trends and affordability, to mention a few.
Many economic forecasters agree that big recessions (i.e. 2008-2011) rarely take place. They recognize more traditional recessions occur for a mere 2-4 quarters, every 5-10 years and usually correspond to local and national job losses. We experience recessions when there are significant influences in the economic sector. Housing or office construction becomes “overbuilt”, or inflation increases too quickly. Current unemployment figures, both nationally (4.1%) and locally (2.4%) are viewed as quite healthy. A developing concern in the construction industry is that we may soon be looking at a labor shortage resulting in higher skilled labor costs (considering devastation to Florida, Houston and Puerto Rico) and increased time frames to complete public and private sector projects.
Downtown Denver continues to be a vibrant urban city. Per Denverinfill.com, downtown neighborhoods have added 93,000 residents, 10,000 new residential units (almost all higher end rentals) and over 5,000 more units are being developed; all since 2010.
From 2010-2016, national employment growth eclipsed 11%, while Denver simultaneously experienced 17%. Other interesting notes include that 60% of all Downtown residents use public transportation and the largest Whole Foods store is opening in the South Platte area to service this revitalized area. The Downtown condo market is poised for success as there is no lack of demand and the construction defects law is no longer an issue.
Nationally and locally, the supply of homes for sale is clearly lower than demand. Most current homeowners recognize it is a good time to sell, but remain reluctant. Many feel content where they live now, others are waiting to build more equity, or they are in fear of not finding something they like or can afford. People are effectively “buying back their houses” by deciding to remodel instead of move. People used to trade up about every seven years, but since the last recession that number has grown to about every 10 years.
Many remain renters due to worries about other financial obligations, qualifying for a mortgage, or inventory choices. Millennials have delayed buying a house and having children, but are now older and buying in more suburban areas.
For those concerned or curious how their financial picture is viewed by a lender, I would strongly suggest meeting with a mortgage professional to learn where you stand, and how your FICO score can improve in the next six months. A few tips are:
Do your homework because about 20% of credit reports contain errors.
Single family home values increased in 87% of assessed markets (or 154 of the 178 metro areas), with prices in the western US growing at the highest year-over-year rate of 7.5%. Denver has been growing at a 9%-11% rate since 2012. One million dollar homes are increasingly prevalent. As a Zillow analysis tallied 1,280 million-dollar neighborhoods across the country, where at least 10% of the homes are worth over $1 million. Since 2014, the number of $1 million neighborhoods have doubled, totaling 13 currently in Denver.
For decades, people who have chosen not to make a move use the reasoning they don’t want to pay the current prices (they will wait). Denver’s average price in 1983 was $80,000. Today’s average single family home in Denver is about $480,000.