Despite a sustained hot market in Denver, expert sees no sign of housing bubble

by | Feb 20, 2017 | Blog, Denver Real Estate Market

While the Denver housing market remained heated in January, as active listings dropped and prices rose significantly over last year, experts see no sign of a housing bubble.

According to the Denver Metro Association of Realtors, there were 3,974 active listings in January, compared to 4,186 in January of 2016. This represents a 5.1% decrease.

Meanwhile, average sold prices have jumped 8.3% from last year. The average sold price in January was $402,749 compared to $371,900 in January of 2016.

Given the sustained sizzling market, many worry that Denver may be in the midst of a housing bubble, but most experts see no reason to worry.
A recent article in 5280, for example, featured an interview with Anthony Rael, former chairman of the Denver Metro Association of Realtors’ Market Trends Committee. Real eased any concern that the market is in danger of collapsing. “There’s just no indicator there: We’ve got a great job market, one of the lowest unemployment rates in the country, and people still want to move to Colorado. We will continue to see growth in the housing market,” Rael said. “I just hope it’s a more manageable single-digit growth.”
In the article, Rael noted that several elements are important to consider concerning Denver’s housing market in 2017:
Interest rates: Rael noted that if interest rates rise to 5%, that may be a tipping point that would limit buyers’ spending power and possibly slow appreciation. The latter would be a positive development, he notes: “It’s the third year in a row of solid, double-digit appreciation, and we simply can’t sustain that,” he told 5280.
The new administration: While President Trump wrote an executive order cancelling a planned reduction in Federal Housing Authority mortgage insurance rates – a reduction that would have decreased mortgage payments by an average of $500 a year for some homeowners — Rael feels that the new administration won’t have a big effect on the market. “People will still get married and have babies; people will get divorced,” he told the magazine. “Life happens regardless of what Congress does. People are making life decisions, and they aren’t waiting to see what President Trump does before they buy a house.”
Inventory: Perhaps the biggest issue in the coming year will be inventory. Rael feels that if tight inventory continues, likely sparking further price increases, many homebuyers will be priced out of the market. “From my perspective, it’s not a good thing to be the number one housing market in the country,” he said, regarding Denver’s recent status. “I’d rather be number one in job creation.”
Light Rail: Millennials continue to seek out urban areas, but as prices rise, they are being forced to look at neighborhoods farther from the city center, said Rael. This means neighborhoods with easy access to light rail will become increasingly popular. “[G]iven the choice, they’re much more likely to ride the train than sit in traffic,” said Rael.

Curious about Denver real estate?

Have questions about the Denver market?