Our very special Denver real estate market... as told by the media!

These are very special times in the metro Denver real estate market. Home prices are up, rents are up, inventories of homes both for sale and rent are low and our future outlook continues to look great. We talk about some aspect of real estate every month in this Newsletter but sometimes I think it can be hard to realize just how terrific our real estate market is without taking a step back and looking at the big picture. A great way to do this is to check out the recent press headlines and review the real estate news about our local market. In a word, it is amazing!

Denver back at No. 1 for home-resale price gains

“After trailing San Francisco for year-over-year home-resale price gains in July, Denver tied with the California city for the top spot among 20 major U.S. metro areas. For six of the last eight months, metro Denver saw the biggest one-year gains out of 20 major U.S. markets in the price of detached single-family homes, according to monthly data from the closely-followed report series from S&P Dow Jones Indices and CoreLogic. Other than Denver and San Francisco, no other metro area out of the 20 tracked in the Case-Shiller report series scored double-digit percentage year-over-year price gains. Denver's Case-Shiller home price index reached an all-time high of 172.82, topping July's reading of 171.31. An index reading of 172.82 means that local home resale prices averaged 72.82 percent higher than they were in the benchmark month of January 2000, according to the Case-Shiller report series, based on non-seasonally-adjusted data.”

Denver Business Journal

10/27/15

Denver County home sellers make out big in Q3

“Home sellers in Denver County made out big in the third quarter, where sellers sold for an average of a 41.5 percent gain over what they originally paid. That's according to research conducted by California housing data company RealtyTrac, which placed Denver County at No. 6 in the country for highest percentage sales gains. In September, RealtyTrac said Denver home sales were on pace to set a 10-year record, and median selling prices in Denver set an all-time high this summer.”

Denver Post

11/5/15

 

 

Condos appreciating more than single-family homes in Denver

“Condos in Denver have appreciated nearly 20 percent over the past year, which is nearly four times the national average and well above the single-family home appreciation rate in Denver. According to Seattle online real estate company Zillow, single-family homes in Denver have appreciated 15.9 percent over the past year, while condos have appreciated 19.7 percent. The yearly 15.9 percent increase in Denver single-family home appreciation was the biggest jump in the country while the 19.7 percent annual increase in condo appreciation was the second-biggest jump in the country, trailing only the Dallas-Fort Worth area, which recorded a 20.1 percent annual increase in condo appreciation.”

Denver Business Journal

10/27/15

 

 

 

How does Denver rate among nation’s best places to own a home?

“Where's the best place in the country to own a home? Right here in Denver, according to a new report. Porch.com and Redfin created the new list, based on a survey of about 10,000 U.S. homeowners in 67 markets, and using criteria including: healthy living, commute, climate, educational opportunity, economic opportunity, resident satisfaction, walkability, security and safety, real estate confidence, and tax fairness. Denver did the best, ranking No. 1 in the country, in the categories of health living and climate, and coming in No. 2 in resident satisfaction.”

Denver Business Journal

11/9/15

 

A small Colorado city is rated 2nd best in U.S

“There's a city in metro Denver where housing costs are affordable, home-ownership rates are high, cost-of-living is comfortable, education and health care are sound and quality of life ranks high. And that place is Littleton — the second-best small city in the U.S., according to a new WalletHub study.”

Denver Business Journal

11/3/15

 

 

Metro Denver city named one of 5 best places to live

“It wasn't but a few days ago that a new study named Littleton the second best small city in the country. And that place is Littleton — the second-best small city in the U.S., according to a new WalletHub study. Centennial is the No. 4 best place to live in America, according to a new 24/7 Wall St. report that uses data from 550 U.S. cities with populations of 65,000 or more to determine the best.”

Denver Business Journal

11/6/15

 

 

Denver real estate market growth is fourth highest in U.S, says new report

“The Denver area residential real estate market experienced the fourth-highest increase in a new housing report. The Freddie Mac Multi-Indicator Market Index (MiMI) uses four indicators to track an area's residential real estate growth, including home purchase applications, payment-to-income ratios (changes in home purchasing power based on house prices, mortgage rates and household income), proportion of on-time mortgage payments in each market, and the local employment picture.”

Denver Business Journal

10/26/15

 

 

Landlords will love this: Denver is 4th-best city in US for owning rental property

“With its rapidly increasing property values, low vacancy rates and good long-term job prospects, Denver is the fourth-best market in the country to own rental housing real estate. Denver ranked high in categories such as vacancy rates (4.3 percent), property appreciation (11.61 percent), and job growth (2.94 percent). "Denver is once again one of the best housing markets in the country to own rental properties in, leaving All Property Management puzzled as to why it doesn't receive more national recognition as a real estate powerhouse," the company said in the second-quarter report.”

Denver Business Journal

10/28/15

 

 

Denver is No. 2 in the U.S. for real estate investment

“If you're looking to make money investing in residential real estate, look no further than Denver. That's because Denver's ranked No. 2 in the nation when it comes providing the best returns on residential real estate investment, according to a new study by online real estate company BiggerPockets. Residential real estate prices increased a staggering 13.4 percent year over year across the Denver metro region," BiggerPockets said in its report. It's been well documented in the Denver Business Journal that Denver's residential real estate prices this year have increased greater than any other market in the country.”

Bigger Pockets

10/15/15

 

 

Foreclosures: Colorado bucks national trend, sees big drop in filings

“If you are looking to buy a home in Colorado, the housing market had another squeeze in the third quarter with a drop in the number of foreclosures. That's according to RealtyTrac's latest Foreclosure Market Report for the state. Colorado, which ranks No. 37 among the states for foreclosures, had a 17 percent decrease in the number of foreclosure filings from the second quarter of 2015 and is down 15 percent from the same time last year.”

Denver Business Journal

10/15/15

 

 

Denver apartment, single-family home rents keep rising in September

“It's quite clear that rents in Denver have risen greatly in the past year, but by how much? Let's just say that Denver's in the top 10 in the country no matter who you ask and no matter what you're renting. Over at Altisource Portfolio Solutions S.A., its data released on Monday indicate that in the third quarter that ended at the end of September, the rents for single-family homes in the Denver Metropolitan Statistical Area rose 14.6 percent from the same quarter a year earlier. Denver's 14.6 percent rise for single-family house rents was the eighth-biggest jump in the country.”

Denver Business Journal

10/19/15

 

 

Single-family home rents hit new high in metro Denver

“Apartment rents in metro Denver might be on a tear, but single-family homes rents are rising even faster, according to a report from Real Property Management Colorado and RentRange. The average monthly rent on a single-family home with three bedrooms in metro Denver reached $1,998, a 13.9 percent increase from the third quarter of 2014 and up 6.7 percent from the second quarter.”

Denver Post

10/7/15

 

 

Denver is sixth-hottest US commercial real estate market: Report

“Denver is the nation's sixth-hottest commercial real estate market, according to a new report. Colorado was cited in the latest report for making important infrastructure improvements: "Public financing is a tough sell. Yet it can be done, as Colorado has demonstrated in passing bond referendums repeatedly." The report continued: ‘Denver has taken advantage of a location and a culture that are attractive to a qualified workforce and exposure to growing technology industries. ... The overall outlook of good to excellent is led by a strong perception of investor demand, the strength of the local economy, and capital availability.’”

Denver Business Journal

10/8/15

 

 

 

 

 

 

 

 

 

 

An Open Letter Response to the Denver Post - Denver's in the Danger Zone?

        The Denver Post published an article on Dec. 9th called “Denver housing market enters danger zone, economists say” suggesting the housing market in Denver has peaked and is heading for a downturn and many of you asked what our reaction to this is. Some of your clients are worried and hesitating to buy and you’re looking for a reaction. Here are two quick thoughts:

1.      It’s important to remember that the job of the Denver Post is to sell newspaper advertising which means they have a large incentive to write intriguing copy which may or may not make any sense at all. Our job is to give our clients thoughtful, professional advice. They are two very different things. Anyone who makes a decision to buy or not buy a home based on an article in the newspaper needs lots and lots of help better understanding the real estate market, something we’re very good at.

2.      Nobody can perfectly predict the real estate market. Nobody! Not the Fed, not the big banks, not Wall St., and certainly not the Denver Post. And we can’t either. All we can do is assemble the copious and relevant data and try to make some sense of it in order to advise our clients. Choosing a single metric as the Post has done and trying to predict a downturn is at best misleading, at worst downright scandalous.

Will we have a correction “in the months and years ahead” as the Post speculates? Sure. Someday the market will peak and start to settle down. But I don’t think it will happen for a number of years for several reasons, such as:

1.     Even with the increase in metro Denver home prices the Housing Affordability Index is still well above the rate it was during the last upturn in the market between 2002 - 2006. The HAI is the median price of a home compared to the median income, taking into account the prevailing mortgage rate. So, given that homes are still relatively affordable given median (and, by the way, increasing) wages and low interest rates, we haven’t entered bubble territory.

2.     The number of transactions relative to the population of metro Denver is just about at the 25-year average. At the peak of the bubble in 2006 the number of deals was about 20 percent percent above the historical average. When we see the number of closed transactions well above our historical average that’s an indication to me of an overheated market, as it was in 2006. We’re nowhere close to that.

3.      As we led up to the last bubble in 2006, many of the deals were closed with low or no documentation ("liar loans” or “no doc loans"). Today, mortgage underwriting standards are the toughest they’ve been in decades. This prevents unqualified buyers from purchasing property, which mitigates the chance of the market overheating (fewer buyers means fewer purchases means less chance of the market frothing into bubble territory like it did in the past).

4.      Because of reasonable home affordability it’s still cheaper to buy than rent in our market, especially at the lower end. This would not be true in a bubble. For housing price affordability to return to the average level that we saw in the years between 2002 and 2006 either home prices would have to increase an additional 20 percent or interest rates would need to reach 6 percent. Neither is going to happen any time soon.

5.      The imbalance between buyers and sellers we’ve seen recently in our housing market is due to a lack of inventory, not illogical/unrealistic/unsustainable demand from buyers. This imbalance is a logical correction from the past downturn years when we had too FEW buyers in the market. This is how markets are supposed to work, moving in cycles and always regressing to the mean over time.

6.      Rising mortgage rates will help to temper the possibility of a bubble as well. So the positive side of a rise in mortgage rates is that it will reduce the number of buyers and therefore reduce the chance the market will rise out of control and end up collapsing in a bubble.

Here are a few metrics I watch closely to look for signs of a weakening housing market:

- Housing inventory. When the inventory of homes for sale rises, supply will begin to balance with demand and slow the price increases. We’re still at record-low inventory so I don’t expect to return to a balanced market for several more years.

- Number of homes sales. If we see a spike in homes sales (most likely due to increased inventory of homes coming on the market) we can expect a slowdown in the housing market to follow just as we saw after our home sales spiked in 2006. At this time, we are right at the 30-year average of homes sales/year/capita which tells me the market is not overheated.

- The economy. Metro Denver has a booming economy which is contributing to our strong housing market. If the economy begins to falter that will affect housing. I see no sign of that happening anytime soon.

- Interest rates. Low interest rates have contributed to relatively high home affordability, continuing to help the housing market. If interest rates spike that will decrease affordability. But no one can predict interest rates and trying to do so is simply a waste of time.

          For these and many other reasons I believe our market will continue to be strong for the foreseeable future, but of course it can't grow indefinitely. Since the inventory of homes for sale is still extremely low I think the demand will still exceed the supply for the next 3-4 years and prices will continue to rise for at least the next few years. No bubble on the horizon yet. Stay tuned!