Over the last two quarters, economists, brokers and other entities have tried to make heads or tails of the market. Last year, Metro Denver’s market had a substantial swing, from January 1, 2018 through the end of the December. As you will see in Figure 1, our property values increased over 11% through the first 4 months of the year, and then retreated to a final overall appreciation rate of 4.5% by yearend. The market generally believes that that “summer is the time sell,” so inventory usually floods the market at that time, causing an oversupply that results in a halt to appreciation. We’ve seen this trend annually, even as the market has surged throughout the last five-plus years.
In the past, the price level achieved during the first quarter was where the values were by the end of each year, but 2018 was different. The peaks were higher, and the drop was more significant. This dramatic cycle was compounded by rising interest rates (which decreased affordability) and the slowed immigration to Colorado (which decreased demand).
What does this mean for 2019? We anticipate the market to continue to be somewhat erratic. The market is projected to continue to positively appreciate. According to a December analysis published by Zillow, “Denver, Washington, D.C., Atlanta and Dallas were named as the four markets most likely to outperform the national average rate of home value appreciation.” As seen in Figure 2 (below), the market is starting to contract, allowing for more demand and continued appreciation. The dynamics are notably softer than last year at this time, but positive and in line with Zillow’s general sentiment.
Overall, Denver has a strong economy, interest rates are still historically low, and the overall supply of housing inventory is also historically and substantially low. (As a point of reference, an inventory of 16,000 active homes is considered a “balanced market,”—i.e., neither a buyer’s nor a seller’s market—and Denver offered less than 4,000 in December.) The above factors point to a comparably stable housing market going forward. We have had a crazy ride, and a new normal is welcome and needed.