There’s lots of talk across the national news media about the rising home prices and fear of a bubble. There is no question that real estate values have increased substantially since the recession. Indeed, the year to date average home price as of August 2017 was $425,843, an 8.2% appreciation. While we’re likely to see a slowing rate of appreciation, an impending bubble burst — with homes losing value — isn’t going to happen anytime soon. Here are three reasons Denver’s real estate market will see more appreciation.
1. Population Growth. The Census Bureau expects the rate of growth to continue for at least another decade. Denver metro is expected to grow from 3.1 million today. State chief economist, Patty Silverstein, predicts Metro Denver’s population to continue to grow at a rate of 1.8 percent, compared .8 percent population growth forecasted for the country as a whole. Adding more than 50,000 people a year creates a lot of housing demand.
2. Millennials. According to the Metro Denver Economic Development Corp studies, the largest growing population group in Metro Denver is Millennials (ages 19-35). Two years ago this population totaled nearly 891,000 people. The group is expected to continue to remain at least 24% of Metro Denver’s population through 2025. At least 300,000 still live with parents. That’s a lot of pent up housing demand! Moreover, most Millennials are aged 29-35, which is a group beginning to reach their income potential in the next 6 years. This group will drive an increase in home buying, ensuring that Denver’s real estate market will see more appreciation
3. Inventory. We don’t have enough homes to keep up with the demand caused by our growing population and our home seeking Millennials. New construction starts remain far below what is needed to provide enough housing. We also have a growing population of 65+ who are choosing to stay in their homes, locking up that potential inventory for resale. Supply and Demand 101 predict inventories should have increased in 2013…we are still waiting. Inventory for the smallest 50% of homes will remain tight, and probably getting tighter, in 2018.
Of course a healthy real estate market must be fueled by jobs and economic growth. Economic growth looks good too, but that would be a reason #4. I’m confident in saying that Denver’s real estate market will see more appreciation.