We would be remiss in not acknowledging what a tumultuous, maybe even bizzare year 2020 was, with Denver being no exception. The virus, the shutdowns of business and schools, social unrest, economy questions and political turmoil of epic proportions.
We also saw, in many cases, families spending more time together.
Work shifted from lengthy commutes to a quick walk to the spare bedroom in pajamas.
We began to see population movement away from some cities to smaller towns where community might be found.
We saw more golfing, camping and mountain biking in Colorado than ever before.
We saw unprecedented movement in the Denver real estate market and the markets around the country fueled by adaptation to the demands, and in some cases flexibility of work and school from home.
Whether or not migration for community or lifestyle continues in 2021, there are fundamentals to the national and local real estate markets that most likely mean continued appreciation in home values, and Denver is no exception.
2020 DENVER METRO MARKET STATS
Here are some quick stats for the 2020 Denver Metro real estate market.
The overall residential real estate market appreciated by approximately 9% this last year, only slightly above the last 5 year average. The sold price of the average single-family-home however, accelerated in appreciation the last 6 months of the year and was up as much as 18% year over year in October, hitting an all time high of $614,000.
A record of more than 57,000 homes sold in 2020, or a 7% increase over 2019.
The confluence of events including continued Colorado population increase, rapid rebound in economic optimism, increased demand from lifestyle changes for many households and further decline in interest rates drove demand and skyrocketing prices.
Increased demand, not a shortage of supply drove the market conditions in 2020.
Approximately the same number of homes were listed for sale in 2020 as 2019 and about 2% more than the last 3 year average, at 65,000 homes.
Interest rates remain in the mid 2% range for a 30-year fixed loan and we have started the year with a very low supply of homes.
With migration to Colorado expected to put continued pressure on existing inventory, we expect to see appreciation in home prices throughout the front range. If interest rates remain low, expect Denver home prices to see a year over year increase by at least 6% in 2021.
No one can predict the outcomes of continued political turmoil, policy changes, public health decisions or the economy. What we can confidently say is the Colorado real estate market has all of the conditions poised for a year of home value appreciation.
LONG TERM CONSIDERATIONS
What does that mean for the long term?
Demand is driven by a number of factors, but the biggest is the access to affordable capital, or low interest rates. As interest rates eventually rise, demand will start to soften, inventory will increase and we will be in a more balanced market. Prices will level out to lower single digit appreciation and in some areas, we may eventually see a pull back in prices. Note: we would need 6-8 times the current inventory for this to begin to occur.
But remember, there will always be the equation of supply and demand. Colorado is the 4th youngest state in the country with a population that is driven to stay put and be homeowners. In the next 25 years, Colorado’s population is expected to grow by another 40% at a 2.2 million increase. More than 1.8 million of those residents are expected to settle along the front range and almost 1 million of those in Denver proper.
Regardless of interest rate changes, this population increase will put continued pressure on demand and home prices. Colorado real estate may be one of the best long-term investments in the country.