We are entering the second quarter of 2019 on the heels of a notable year for the national economy, one of twists and turns for the Denver real estate market. As we experience with every real estate cycle, the market can shift in the blink of an eye.
For this reason, we at the Denver Metro Association of REALTORS® place a high priority on continuing education courses and informative events to keep local REALTORS® apprised of the state of the market for the benefit of home buyers and sellers throughout the Denver area. In January, we held the second annual Economic Summit, which highlighted our local, state and national financial and economic trends.
I sat down with the event’s keynote speaker, an internationally acclaimed economist and the president of Graphs and Laughs, Elliot Eisenberg, Ph.D., to discuss the current national economic landscape and the factors that have potential to stir up the Denver real estate market.
Here’s what he had to say:
How are national economic trends impacting the Denver real estate market?
Elliot: While Colorado does have a much more diversified economy compared to 10-30 years ago when everything was centered around oil, Denver is not immune to national economic trends by any stretch of the imagination. As it relates to real estate, housing inventory is going up a little bit, prices are going up more slowly than before, days on market are going up more than before and all of this mirrors national trends. Denver is still a hotter market than others throughout the U.S., but even being as healthy as the market in Denver is, it is still impacted by macro trends. It may be just a little less high than it has been in years past, pun intended, but the Denver economy is still a happy one.
Can you share the top three changes or trends you are seeing that are highly impacting those living in Denver?
Elliot: I think the top things that are impacting those living in, or hoping to live in, Denver right now are:
Oil prices– They were really rip-sawed drastically in the last month or two of 2018, which heavily impacts Denver as it is a high oil-producing state. Prices fell by 30-40 percent, then jumped back up again – but still sit lower than they once were years ago. Trade– There are a lot of balls in the air right now as it relates to international trade. Denver’s prominent industries include aerospace, telecommunications, technology and oil, which are all highly-traded products and intelligence, so decisions made around trade will highly impact the Denver economy. Higher interest rates on homes– Interest rates went up a little bit, down a little bit, then went back up. Increases in rates will impact the market.
How does the current state of the real estate market tie into home inventory?
Elliot: Despite the trepidation, inventory is still going up. It was excruciatingly low for a very long time, which was not good. It drove prices up like crazy and REALTORS® couldn’t sell because there was nothing to buy. This, in turn, made buyers reluctant to look for homes on the market in fear of bidding wars and cash offers. Now, home buyers are much happier because there are more options in terms of inventory. There is a difference between rising inventory and a calamitous inventory increase. In Denver, it has gone from inventory lasting about one hour before being sold to two hours, which really doesn’t make a perceptible difference. We are seeing inventory increases nationally, which we have been desperate to receive. During the Great Recession, inventory doubled, which was a disaster. This, by contrast, is a very tiny – albeit slow and steady – increase.
How does the above tie into home prices?
Elliot: Home prices are still going up, but slowly. There is still a very high demand from buyers. But with higher inventory and lower price appreciation, buyers are more inclined to look for homes.
How does the above tie into jobs in Denver?
Elliot: Home prices in Denver have become very expensive, on par with home affordability in Washington, D.C. Denver is now among the top 10 least affordable cities, which poses a challenge for the workforce. The city is far from number one, but still top 10. Denver may see slower immigration rates as a result, and jobs may slow down a bit.
If there was only one thing readers should take away from this, what would it be?
Elliot: It would be that the economy is OK! The economy is moving forward, granted at a slower pace. It is natural for a recession to be out there somewhere in the future, but there are no signs of it being imminent. Could we have a recession in 2019? Anything could happen, but a lot of negative factors would have to come into play such as manufacturing declines, oil prices going down, a monetary policy mistake like an unnecessary interest rate hike, the government shutdown happening forever, trade negotiations going sour and so forth.
Today, the labor market is strong and I am comfortably confident that this will be another year of growth.
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