What to Expect in Real Estate in 2019
As you know, our local real estate market has been on steroids for the last several years. The Denver Metro Area was actually the number 1 appreciating market in the country over the last 10 years combined. That trend has been fueled by historically low levels of home inventory. That’s been great for sellers and a huge struggle for buyers. At some point, we all know the market will shift. It can’t keep going up, let alone at this pace. Are we getting to that point?
On a national level, we are seeing signs of a cooling market. Price appreciation has slowed down and the number of sales has declined. Locally, it’s a mixed bag. Denver has seen a big change over the last 6 months in housing inventory. At the end of 2018 there were 42% more homes for sale in Denver than there were one year before! While that is a huge change, it also has to be put in historical context. Inventory levels in Denver are still at about half of the historical norm so it’s not like we have an oversupply yet, we’re just getting closer to an equilibrium. In the Denver metro area, price appreciation was less than 2% for the year, compared with several years of double digit appreciation. So, it appears a shift is happening.
However, in Boulder County, things haven’t changed so dramatically. Prices were up 8% in the County as a whole in 2018 and inventory actually dropped about 2% compared to 2017. You have to wonder though if what’s happening in Denver will soon spread to Boulder County. Don’t be surprised if we start to see a similar shift as Denver, with more houses coming on the market and prices leveling off.
A major factor in all of this is our state and local economies. The Colorado economy remains one of the top 5 performing states in the country. Our unemployment rate is lower than the national average and, according to the Leeds School of Business yearly Economic Outlook - https://www.colorado.edu/business/business-research-division/colorado-business-economic-outlook - Colorado will see a net in migration of about 70,000 people in 2019. All those folks have to live somewhere, which puts continued pressure on our housing market.
Taking all this into consideration, the real estate market will likely remain strong in 2019 but it’s not expected to maintain the feverish pitch of the last several years. It’s likely that we will see increased inventory levels and slower price appreciation. The Leeds School’s Economic Outlook predicts modest home price appreciation of 2-3% this year. This should provide some welcome relief to home buyers. However, expect this moderating trend to be more obvious in higher priced homes than at lower price points. There’s such a demand for affordable and moderately priced homes that price appreciation and competition will likely remain stiff in those markets.
