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My fellow Coloradoans, let me take this opportunity to share with you the state of the local real estate market.

While high prices and low inventory in Denver's housing market dominated headlines well into 2018, 2019 is likely to see a softened and normalizing market.

National Reports

Many homeowners believe that rising interest rates and home prices have scared away buyers and therefore have not listed their houses for sale. However, the truth is that buyers who were unable to find a home last year are out in force, and there are more still coming.

Approximately one-third (32%) of Americans plan to purchase a home in the next five years. Millennials are most likely to have such a purchase in their five-year plan (49%), versus 35% of GenX and 17% of Baby Boomers.

Local Inventory

Mid-year 2018, we saw a huge increase in inventory that we haven't seen in years; that really slowed things down for sellers, and gave buyers a little more breathing room.

From June to July, the average and median prices of homes dropped. Inventory also hit a three-year high. This resulted in a "perfect climate" for slowing activity and price reductions. In August, it hit a four-year high.

Those conditions have generally persisted. Currently we have 8 weeks of inventory, up 2 weeks from this time last year.

Interest Rates

Borrowing costs—at least for now—are still going up.

The Federal Reserve rattled markets by raising its benchmark interest rate in December. Two to three interest rate increases are projected this year.

As the year progresses, the economy is expected to slow while concern of an impending recession will grow. Many industry analysts expect the average rate for 30-year fixed mortgages to hit 5 percent, and possibly higher, in 2019.

New Construction Starts

It’s been a solid run for Denver homebuilders as annual new home starts are up 7% to 12,800 homes, the 28th consecutive quarter for annual start increases and the highest level since 2007. The Denver-area housing market shows detached home starts experienced a decline of 12% to 1,674 homes in Q4 of 2018 (4Q18), however, in response to the economic turbulence last fall. The biggest gains in 2018 came from townhome/duplexes, increasing 4Q18 starts by 49% and annual starts by 25%.

Normalizing Market

The housing market in 2019 will be characterized by continued rising mortgage rates and surging millennial demand. Rising rates, by making housing less affordable, will likely deter certain potential homebuyers from the market. On the other hand, the largest cohort of millennials will be turning 29 next year, entering peak household formation and home-buying age, and contributing to the increase in first-time buyer demand.

Ultimately, 2019 will still be a great year for buyers and sellers. I think we'll see more normalizing of the market; effectively resulting in more balance between buyers and sellers, which is good.

Looking Ahead

What if you’re not buying or selling in 2019?

• Equity will likely continue to increase by 2–6% each year through 2020.

• From what we can see, the real estate market is not going to crash.

• Regardless of your neighborhood, buyers are interested.

In Summary

There will still be advantages in the real estate marketplace for both homebuyers and homesellers.

As always, we know everyone’s situation is unique, so please give us a call to discuss how the real estate market impacts you. Give us a call. We’d love to hear from you!

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The Altitude Group

Matt Thomas

REALTOR® | MCNE

303-269-1617

Matt@AltitudeRealEstateGroup.com

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Chad Schneider

REALTOR® | CNE

720-767-2423 (CHAD)

Chad@AltitudeRealEstateGroup.com