Editor’s note:  Charles Roberts will be one of the featured speakers at the upcoming Out of State Investors Conference in Los Angeles, CA on May 19-20.  For more information please click here.

How Long will the Strong Denver Real Estate Market Last???

by Charles Roberts

How’s the Denver market you ask? On fire and our strong housing market is not going away any time soon. I’ll say it again, WE ARE NOWHERE NEAR A DOWNTURN IN THE MARKET! The large pent-up demand for houses continues to gobble up any inventory that makes it onto the market and is one of the many reasons I believe demand for homes is going to stay strong for the foreseeable future. As long as demand stays strong and supply remains constricted (we are at a near record-low number of homes on the market for sale) you can be sure home prices will continue to rise. Where is this large pent-up demand coming from? Here are just a few of the sources:

1. Home formation (e.g., marriages) fell dramatically during the downturn while the economy crumbled. As the economy improves more people are getting married and creating homes. For example, from 2003-2006 a total of 1.6 million households were formed in the U.S. But from 2007-2010, as young people lost jobs, moved back in with their parents, and didn’t have the economic confidence to marry and create households, only 600,000 households were created. That number is now rising quickly. From 2013-2017, 1.7 million households were formed, and these folks want to buy homes! In a recent survey by the Joint Center for Housing Studies of Harvard University, 94 percent of 22-25 year olds said they expect to buy a home in the future. That’s right, young folks still want the American Dream of having a family and owning a home!
2. The population of metro Denver increases about 1.5 percent per year and will continue to do so for years to come. Does anyone seriously believe that our population is going to fall in the next 10 years? The best demographer in Colorado, Patti Silverstein, believes the population of metro Denver will rise from 3.05 million in 2016 to 3.5 million in 2025. More people = more home sales = continued long-term strength in our housing market.
3. And speaking of population, here’s another important point. The inflow of immigrants from countries around the world, both legal and illegal, plummeted during the downturn because of the reduction in U.S. employment opportunities. As the economy has rebounded immigration is skyrocketing. These folks need a place to live (hint…hint… investors and builders).
4. During the recession, about 5 million people lost their homes and had their credit destroyed. As their credit improves over time, more and more of them are becoming qualified to buy again. They were homeowners once and most want to be homeowners again as soon as they are able. These folks have been a big source of demand for housing the past few years and that will continue to boost the housing market.
5. Millions of others, especially young people, saw their friends and relatives lose their homes during the recession and swore to never buy a house. They learned the wrong lesson. These are a lot of the people who have been renting the past seven years instead of buying, making the rental market historically strong. These are also the very people who lost out on the recovery and forfeited tens or hundreds of thousands of dollars in home equity because they didn’t buy when the market was soft and prices were low. As the housing market continues to improve they’re looking seriously at buying their first home and building wealth through home ownership.
6. Related to #5, many renters have noticed how quickly prices are rising and feel they need to jump in now while homes are still relatively affordable given the historically low interest rates. In the last 12 months the average sales price of a single-family detached home rose another 11.4 percent in metro Denver. The more home prices rise, the greater incentive renters have to finally take the plunge and buy a home.

These are just a few of the many reasons demand for homes remains strong.

Charles Roberts is a market-expert in Denver Colorado and is president of both Your Castle Real Estate, a 530 person real estate firm and Shorewood Real Estate, a 200 person real estate firm. He is a registered appraiser, licensed Realtor, and a former loan officer. He has invested in Denver real estate for the past 20 years, completing dozens of fix up projects along the way, and currently manages his own portfolio of properties in metro Denver. His specialty is helping investors buy cash flow properties. 

Charles will be one of the featured speakers at the upcoming Out of State Investors Conference in Los Angeles, CA on May 19-20.  For more information please click here.