Denver is one of the most desirable cities in the U.S. The economy is strong, business is booming and the mountains are breathtaking. However, has 2020 shaken things up a bit?
A drive through central Denver quickly reveals an increase in tents, housing the homeless. There is also an escalating tension among residents about how to handle the COVID-19 pandemic, as well as Black Lives Matter protests.
For many, Denver is starting to feel like a different city than it was just a few years ago. At the beginning of this year, no one could have predicted that 2020 would have evolved into such bizarre circumstances.
With all of these developments, there was bound to be some impact on the local housing market. Using data from the local multiple listing service for the Denver area, REcolorado, here’s what you need to know about the current state of the Denver housing market, and what you can expect in the future.
Is It a Buyer’s or Seller’s Market in Denver Right Now?
In 2016 and 2017, Denver had one of the hottest seller’s markets in the country. Homes would have multiple offers and net far above asking price. Home sellers relished the opportunity to cash in on their equity with lightning-fast home sales.
In 2018, the seller’s market began to slow down and continued to do so up until the first few months of 2020. In the second quarter of 2020, the number of available homes began to drop again.
Denver is still in a seller’s market, but it’s not the extreme seller’s market the area experienced in 2016.
Let’s also look at this from another angle: Realtors use the term “months of inventory” as a way to measure a market’s strength. This term references how many months of sales a market can sustain if no new homes are listed for sale before it entirely runs out of inventory. For example, if a market only has two months of inventory, and no new homes are listed, then it would run out of homes within two months. Agents consider it a seller’s market when there are less than four months of inventory.
At the height of the housing market crash, Denver had a 6.4-month supply of inventory. This was a strong buyer’s market. It was a time when buyers had plenty of homes to choose from and could often get a great deal.
At the busiest peak of 2016, Denver had a 1.3-month supply of inventory. During this time, homes would sell in hours with a pile of offers. It was a crazy time for real estate agents. Things were moving at a furious pace, and high-pressure deals were happening all over the city.
Today, Denver has a 1.7-month supply of inventory, so it’s still a seller’s market. It may not be the same seller’s market that we saw in 2016, but it still favors the seller. According to MLS data, the last time Denver was in a buyer’s market was May of 2012.
You may hear real estate agents in Denver talking about the current “slowdown” of the last few years. But their slowdown is minimal compared to an actual collapse like we experienced during the Great Recession.
Homebuyers continue to have a hard time finding homes in certain areas of Denver, but many sectors have experienced longer days on the market than we saw in 2016.
How Has COVID-19 Affected Denver’s Housing Market?
On March 26, 2020, the governor of Colorado issued a stay-at-home order, valid through April 11. This mandate shut down all real estate showing activity for the first few weeks, and then later allowed showings with certain restrictions.
Many consumers were too concerned about the pandemic to think about their real estate needs. Real estate agents were waiting for clarity on how they should proceed with business. Eventually, the restrictions were lifted, and Realtors started selling homes again.
During this time, the Denver real estate market took a hit, but home sales bounced back after the stay-at-home order expired.
The demand for homes in Denver was too great for a slow down in sales to continue. People need homes, and the market can’t be stopped.
In April, Denver lost nearly 1,350 home sales due to COVID-19 restrictions on businesses. In May, Denver lost an estimated 2,727 home sales. That’s a combined total of 4,077 home sales lost in Denver due to the coronavirus pandemic.
From the chart above, it may seem like Denver took a substantial hit, but considering the circumstances, the city’s real estate market held together quite well.
What Will Denver’s Housing Market Be Like in 2021?
The real estate market in Denver started 2020 incredibly strong. As we venture into the third quarter, the market appears to be on track to finish even more robust than it started.
The median sale price in Denver peaked in 2018, but it’s positioned to be higher in 2020 than it was in 2019, based on the current year-to-date statistics. The median home price in the city of Denver is $447,500 as of July 2020. It was $428,000 at the same time last year.
There is no indication that the demand for housing will slow down any time soon. As long as the need for homes continues to increase, the prices will continue to steadily rise. If the market does not slow down, the median price of a home in Denver will be around $470,000 by this time next year.
Looking at the chart above and the represented sales trends, it’s hard to imagine prices dropping any time soon without some unpredictable event bringing it down. However, if we’ve learned anything this year, it’s that the unexpected does happen.
[Read: How to Buy a House]
What Factors Can Change Denver’s Market in 2021?
Low interest rates continue to fuel the housing market in Denver. The Federal Reserve has made it clear that it does not intend to raise interest rates any time soon. If rates change, the local housing market will inevitably change as well. But for now, it’s reasonable to expect the seller’s market in Denver to extend through 2021.
The national economy is also a big question mark, as 2020 has seen our national debt skyrocket. The unemployment rate continues to be a lingering issue that has yet to be fully resolved. These challenges could have an impact on the Denver housing market next year, as well as that of the rest of the country.
The big question is, “how much of an impact will it have?” It’s clearly too early to tell.
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Denver Real Estate Housing Market Forecasts & Trends 2020 originally appeared on usnews.com