The year 2021 is a year of change. We have a new president. The vaccine rollout hopefully helps ease the pandemic. And Denver home prices will finally ... no, wait. Some things will definitely stay the same this year.
The Denver Metro Association of Realtors predicts Denver home prices will rise 8% in 2021.
For years, armchair experts have predicted the demise of Denver's real estate market. Is 2015 the year? What about 2016? Surely 2017, right? Again, this year, you have the keyboard experts asking "Is the Denver housing market in a bubble?" or "Will the Denver housing market crash in 2021?"
Those prediction weren't right before, and they're like not right this year either.
Unfortunately, low interest rates and high demand from remote workers and coastal migrants mean Denver home values are poised to increase in 2021. Here's why the market isn't going anywhere. (And maybe why you should buy before it's too late.)
Low interest rates
When money's cheap, people borrow. Interest rates have never been lower than they are now, and they are likely to stay crazy low this year. Fannie Mae predicts the average 30-year-mortgage rate will be 2.9% in 2021 and will rise only slightly to 3.1% in 2022.
Low rates fuel demand from buyers wanting to take advantage of cheap money. (The rates were so low in 2020 that while home values went up in Denver, it was actually more affordable than 2019 to buy.) With continued demand, comes competition and with competition, comes price increases.
Historically low housing inventory
In December 2020, there were roughly 2,500 homes on the market, according to the Denver Metro Association of Realtors (DMAR). That's half as many as December 2019, which was already historically low, and waaaay under the 12,000 listings that Denver has averaged in December going back to 1985.
What does this mean? It means we don't have any supply. And while I'm no economist, I do understand the basics of supply and demand. If there are a lot of buyers competing for a very few homes, that drives prices up.
Denver's net migration is on the rise
For more than a decade, Denver has had a positive net migration. To put that more simply: more people are moving in to Denver than are moving out. For years, Denver has been ranked near the top of states receiving those highly educated workers fleeing the high prices of California and New York (and the frigid weather of Chicago).
It's not hard to see why. Low unemployment, 300 days of sunshine, proximity to the mountains, great beer, legal weed, awesome parks, bars, restaurants and arts scene.
Of those people moving to Denver, 62% are millennials who are the biggest cohort of buyers. Think about this fact, there are more than 72 million Millennials in America, a larger generation than the Baby Boomers. And those Millennials are entering prime home-buying years right now. This fact ALONE will keep demand for housing strong.
And this dynamic will only increase as remote workers continue to flock to Colorado. (In Denver, 46% of adults telework, according to the DMAR report, compared to only 35% of adults nationwide.)
All of this puts more demand on an already low-supply Denver real estate market.
Ain't a cow town no more
What was once an oil town is now a diversified economy. Denver's growth is supported by tech, health care, finance, leisure and hospitality, aerospace, and yes, still oil. Disruptions in any one sector won't take us down. This is probably why Moody's named Denver one of the top 10 cities best-positioned to recover from the Covid recession.
It appears to already be happening: About 80% of pandemic-related job losses in Denver have already been recovered, according to a January 2021 DMAR report. And as further proof of Denver's resiliency, Colorado has the lowest mortgage delinquency rate in the country.
So ... Is Denver real estate a good investment?
Fair question. It's also a painful question to ask and answer. We have had friends grapple with whether they will stay or leave as housing gets out of reach for more people.
The question I'd ask is, What are your medium-term and long-term plans? Do they involve staying in Denver? Do you think you'd want to own a house eventually? (Or to put it another way, are you okay renting forever?) Because if you're staying and if you want to own, 2021 is likely going to be cheaper than 2022 and 2023.
And heck, get creative. House hacking is a great way to offset your mortgage costs. We help tons of buyers get into rent-by-the-room homes to house hack. We also have searches set up to find homes with basement apartments or other mother-in-law setups that allow separate rental incomes.
And keep this in mind. Real estate is a long-term play. It's about time in the market, not about timing the market. What you buy today will almost certainly be worth a lot more in 10 years. That's tough to see in a market like this, but it's no less true.
Good luck!