The owner of Your Castle Real Estate, Lon Welsh, is in my opinion, a brilliant analyst who can understand trends and make pretty accurate predictions. Here is his crystal ball for the Denver Market.

Multiple offers will likely be with us for at least 4-6 months.

What Will Slow the Market Down:

1. All of this activity is enabled by record low mortgage rates.  Historically, rates go up 0.5% after a presidential election. I think there are other economic pressures that will conspire to drive mortgage rates up a total of 0.5 to 1.0% in the next year.  That’ll eventually slow down the market somewhat.

2. I doubt that many consumers are thinking of this, but the Gallagher amendment was overturned in the election.  Residential property rates (around 20% of the cost of commercial rates for a similar value building!) will go up, and commercial property taxes will go down in the next assessment cycle.  Don’t be surprised to see some residential property taxes go up 50%.

What Will Keep the Party Going

1. New construction is up, but not nearly enough for our demand.  Labor shortages (especially skilled craftspeople), scarcity of land and water, and very high copper and lumber prices make new builds not that economically attractive.   We are very unlikely to overbuild and flood the market with inventory as we did in 2004-2007

2. There’s no evidence that we’ll see many short sales or foreclosures from this recession.

3. Denver is continuing to experience population growth both organically (births – deaths) and transfers (moving in vs moving away).  We continue to attract companies with high paying jobs.

4. A huge number of Millennials are in their peak years to be first time buyers.

 

Prognosis

 

  • Very strong market for at least 4-6 months; not much change from last six months.
  • Rates will eventually go up, slowing things down a little for 4-6 months while consumers acclimatize to higher rates.  HOPEFULLY the mortgage increases will be gradual.
  • Most of us will be vaccinated by middle of 2021.
  • We’re selling a lot of big homes now, and not many small homes; that will reverse sometime after most people are vaccinated and COVID is finally out of the headlines.  The change in mix of what we sell could result in “average” price appreciation that looks a lot lower, perhaps even negative, for a few months in 2021.
  • Economy will have largely recovered by mid-2022
  • Denver’s RE market will be pretty strong (not as insane as past six months) for 2022-2025 (or longer).
  • Appreciation won’t be as high as it has been (6-10% annually), but real estate will still be a better investment than the stock market.
crystal ball
%d bloggers like this: