Often hailed as the Mile-High City, Denver, Colorado, has long been the center of speculation among real estate heads. Its real estate market has been witnessing an unprecedented surge in demand.
This is mostly due to economic factors, migration patterns, and lifestyle preferences. However, the recent shift in mortgage rates and other demand-affecting factors may cause a sudden change in its trajectory.
As we head towards the end of the year, investors are increasingly becoming curious about the future trend of this market. Below is a complete analysis of the current state of Denver’s housing market and a data-driven and expert-backed Denver real estate forecast for 2024 and beyond.
The Current State of the Denver Housing Market
Denver’s housing market is characterized by high demand, elevated prices, fast-paced sales, and low inventory.
Median Home Prices
According to Zillow, the average home price in Denver was $558,402 in October 2023. This was down 2% from October 2022. However, an uptick in home prices was seen after April 2023, despite the overall slowdown, rising by 1.1%. The overall slowdown was prevalent in the rest of the state and many cities across the U.S.
Inventory Levels
Inventory levels in Denver’s housing market are significantly low. In October 2023, the total inventory was around 4,751 homes, according to Rocket Homes. Although an increase of 4.8% from September’s 4,751, it is still low given the high demand. As a result, the market is heavily skewed towards sellers. Bidding wars are common, hence the high home prices.
Sales Volume
Denver’s real estate market recorded a decrease of 7.6% in sales volume from September 2023 to October 2023. October’s sales stood at 1,067 as opposed to September’s 1,155. This was despite an increase in inventory. 49.4% of homes sold in October were sold below the asking price, meaning buyers can negotiate a good deal if they understand the market and are strategic.
Days on Market
According to Zillow, a typical home in the Denver real estate market goes to pending in about 19 days. The short timeframe further reinforces the seller’s market status.
Diverse Housing Options: Catering to Varied Needs
Denver’s housing options range from modern high-rise apartments in the city’s hotspots to charming suburban single-family homes.
Its versatility is also mirrored in pricing, with homes ranging from affordable condominiums and apartments to luxury estates like sprawling townhouses.
Investors will find this market variability advantageous as it opens up numerous pathways for return on investment. For example, affordable housing in up-and-coming Denver neighborhoods could see long-term appreciation.
Meanwhile, luxury homes in upscale Denver neighborhoods are suitable for wealth preservation and can fetch high rental income. This broad housing palette and great market performance suggest a buoyant investment climate for the foreseeable future.
The Denver Housing Market Forecast in 2024 and Beyond
Experts predict that the Denver housing market will continue to grow. However, it may be slower compared to the preceding years.
The slowing growth rate is mainly due to economic factors like inflation and high mortgage rates, which may dampen buyer enthusiasm. Wallet Investor predicts that the average home price in Denver will grow by 5.07% in one year and 24.07% in five years.
Is It Wise to Buy a House in Denver Right Now?
On the investment front, it is an excellent time to enter the Denver real estate market. This is especially true for long-term investors looking at returns in the next five years or more.
Although mortgage rates are declining, they are still much higher than during and before the pandemic and will likely not drop significantly anytime soon. Most homeowners are currently locked in at lower rates and are unlikely to put their houses up for sale. This will keep the inventory down and prices high.
For investors, the Denver rental market looks promising. With a growing population and a large percentage of renters, rental properties can provide investors with a steady income stream.
Factors Shaping the Denver Real Estate Market Forecast
Several factors have been leading to the growth of Denver’s housing market and are expected to fuel it in 2024 and beyond. Below are some of the most significant factors:
Economic Growth and Job Creation
Denver has been experiencing economic and job growth in recent years. At the beginning of 2022, its employment levels had fully recovered to pre-pandemic levels. This made the city rank in the top 20 among the 50 largest metros in the United States. Denver’s economy/GDP increased by 3.8% in the 3rd quarter of 2023 and will likely trend upward. Transport, real estate, insurance, and professional services are some of the industries expected to drive Denver’s economy.
In addition, Denver’s employment growth outpaces the national average. According to the Bureau of Labor Statistics, Denver had a 2.6% unemployment rate in November 2023, while the national average was 3.3%. The trend is projected to continue. The most notable job growth is anticipated in retail, hospitality, government, health, and education sectors.
This economic growth will boost the purchasing power of the residents, adding to the housing demand. Job creation will also increase the number of potential homebuyers.
Mortgage Rates Vs. Affordability: A Delicate Balance
A substantial percentage of homebuyers in Denver use mortgages. As the trajectory of mortgage rates shifts, it could affect the housing market in Denver. Expert predictions suggest that mortgage rates will slightly reduce over the years. According to the Mortgage Bankers Association, they will hover around 6.1% by the end of 2024 and 5.5% by the end of 2025, after which they may level out.
The decline will undoubtedly increase home affordability, but the predicted increase in house prices could offset this advantage. The reduction is less likely to cause a significant increase in inventory as many homeowners are expected to hold on to their current mortgages, which are as low as 3%.
Denver Demographic Trends
According to the U.S. Census Bureau, Denver’s population grew 19.2% between 2010 and 2020. Albeit starting the decade with a slight 0.3% decline between 2020 and 2022, the overall Denver population migration will likely be positive for the entire decade. This will increase demand for housing and, hence, market activity. According to Redfin, 2% of homebuyers nationwide want to move to Denver. Homebuyers from major cities such as San Francisco and Los Angeles are leading in this regard.
In addition, Denver’s median age is 34.8 years. This suggests that demand for housing will continue to be high as many residents enter their peak home-buying years and start families. 52.5% of residents have a bachelor’s degree or higher, the city has a low old-age dependency ratio, and a significant number of residents have employment in STEM fields. These Denver demographics reflect a dynamic workforce that can support economic growth.
Inflation’s Influence on Home Values and Market Activity
The U.S. inflation rate stands at 3.24%. This is a decrease from last month’s 3.70% and significantly lower than last year’s high of 7.75%. This rate is marginally below the long-term average of 3.28%.
A lower inflation rate can moderate housing affordability. This is because it reduces the pressure on interest rates and construction costs. This explains the recent downward trend of mortgage rates. However, while lower inflation can have a tempering effect, other market forces, such as supply and demand dynamics, can exert upward pressure on home prices.
Therefore, while the current inflation rate provides some respite, potential investors should carefully analyze all pertinent market indicators before making decisions.
Government Policies and Regulations
Government policies and regulations will impact the Denver housing market in 2024 and beyond. For example, the DASH Act, officially known as Senate Bill S.680, is active in the current Congress. If passed, it will promote decent, safe, and affordable housing among first-time homebuyers. It will provide a maximum $15,000 refundable first-time home buyer tax credit. This will boost demand for housing.
The local government will also impact the housing market in Denver through zoning laws and affordable housing programs. The national government also provides the latter.
Implications for Buyers, Sellers, and Investors
The current state and the Denver real estate market forecast present opportunities for buyers, homeowners, and investors as already established. On the flip side, the dynamics of this market present implications that affect all the parties. This means considerations must be made when making any investment decisions.
Guidance for Buyers: Navigating the Competitive Market
The high demand for Denver’s homes for sale and high home prices mean a competitive landscape for aspiring homebuyers and sellers. Well-informed strategies are crucial for buyers to emerge victorious in this market. The following are key considerations:
- Budgeting and Financial Planning:
High home prices make owning Denver’s real estate expensive. As such, buyers should prioritize financial planning to ensure they are in a position to afford a home here and make competitive offers. Budgeting is key, as is exploring various financing programs. Mortgage pre-approval is also helpful in such a fast-paced and competitive market.
- Thorough Market Research:
With the dynamic nature of the Denver real estate market, buyers need to conduct thorough market research. This will enable them to stay up-to-date with trends that could affect their investment in the near future. It also informs their home hunting, bidding process, and negotiation.
- Enlisting an Experienced Denver Real Estate Agent:
A dynamic and competitive real estate market like Denver will always have a lot of room for mistakes and miscalculations. To make the most of market opportunities, buyers should engage experienced real estate agents.
- Strategic Bidding and Negotiation:
The stakes of investing in Denver’s real estate market are undeniably high. As a buyer, you need to protect your interests in ways like submitting the right offer and negotiating strategically. A home appraisal, inspection, and the help of an experienced real estate agent can help with pricing and negotiation.
Strategies for Sellers: Maximizing Returns
Sellers can also capitalize on the prevailing Denver real estate market conditions to ensure maximum investment returns. The following strategies may be helpful:
- Determine the Right Time to Sell:
Like every other real estate market, Denver’s market has peak and off-peak seasons. For example, due to intense buyer activity, summer listings attract more buyers and relatively higher prices. The opposite is true in winter.
- Prepare Your Property for Sale:
Realtor.com says staged homes sell 88% faster than non-staged homes. Moreover, staged homes sell 20% higher. The National Association of Realtors market reports indicate that over a quarter of homebuyers are usually willing to overlook property faults if it’s well staged. The key focus areas are the driveway, lawn care, tree care, and interior.
- Price Competitively:
Pricing is a crucial determinant in how fast you sell your home and at what profit. A delicate balance is necessary. Note that overpricing tends to discourage buyers. Under-pricing may result in low returns or a slow sale due to suspicion.
- Marketing and Negotiating Effectively:
When a home is ready for sale, it is important to employ effective marketing strategies. List your property with reputable real estate agencies. These agents will use their networks and channels to market your home. They can also help you negotiate offers and close deals.
Investment Opportunities: Diversifying Your Portfolio
Investors looking for innovative ways to make high profits in the Denver housing market can consider the following investment options:
- Rental Properties: With rental prices and demand for rentals steadily rising in Denver, investing in rental properties can be lucrative. This type of investment also offers tax benefits.
- Fix and Flip: The Denver market is ripe for ‘fix and flip’ investments. This is where investors purchase properties at a lower cost, renovate them, and sell them at a higher price.
- Real Estate Owned (REO) Property: Investors can also consider purchasing REO properties in Denver. Lenders own these properties after the borrower defaults on a mortgage loan. Lenders are usually looking to sell these properties quickly and may offer discounts.
Take Advantage of the Denver Real Estate Outlook and Forecast
Denver is a charming city with a high quality of life. Its real estate market reflects this charm, with high demand and appreciating home values being its defining features.
Homebuyers can capitalize on the strength of this market, with a high return on investments being the most probable outcome. For sellers, listing their homes now would mean attracting competitive prices and quick sales. However, navigating this landscape has its challenges. Working with experienced real estate agents is highly recommended.
