by Sam DeStefano
Where does one begin when forecasting the real estate market for 2017? It’s one of those questions that doesn’t necessarily have an easy or reliable answer. The market is an ever illusive and mysterious creature that is influenced by a variety of situations that constantly seem to be walking on the ledge. In today’s world it seems that we are closer than ever to that ledge. And for those of you with high anxiety, it appears that the ledge is also higher up. We have a lot longer to fall.
Before we go into panic mode, I think it’s important to take a step back for some perspective. Many years ago I had a real estate professional, friend and colleague of mine point out the “one” most brilliant thing about the market from afar; “No one ever loses in real estate unless they sell at the wrong time.” This has stuck with me over the years and it always reminds me to keep the big picture in mind. For me 2017 is going to be one of these, “keep the big picture in mind” years.
Home prices have continued to post really strong year-over-year gains and are nearly back to pre-recession highs or higher, but this party is most likely coming to an end. Many have described this year’s Denver housing market forecast as being high plateau. “As long as we have economic growth, we will likely bump along a plateau both in terms of price and volume,” said Mark Boud, chief economist at Real Estate Economics. Boud predicts and confirms that the three-year run of double-digit gains in metro-Denver home prices will come to an end in the second half of this year.
Is this really bad news? I don’t think so. Most professional analysts are predicting a 3-5% growth in value this year, but “If we get anything under 5% in appreciation, sellers will lose their minds and think the market is collapsing,” said Anthony Rael, chairman of the Denver Real Estate Market Trends Committee at the Denver Metro Association of Realtors. While these aren’t terrible numbers they’re nothing to get excited about after the gains that averaged 12% a year from 2013 to 2015.
Why the sudden shift in the market place you ask? Well in a nutshell the Denver home prices have reached the limits of what incomes in our state can support. In addition we have to consider the rising mortgage rates. Mortgage rates for a 30-year loan have been floating in the 3% range and are projected to slowly rise into the 5% range in the next three years. “Those are still low rates, but we are at an artificially low level of mortgage rates,” Boud said. As homes become more expensive to finance, appreciation will begin to slow based on what people can afford.
Again, as we’ve seen in the recent political landscape – anything can happen this year, but we have to take a step back and consider how to add up the analytics we have at hand. From the big picture view we should all be really excited about the forecast for the year. Our homes will continue to appreciate at a meaningful rate, mortgage rates are still going to be historically low and we live in a growing economic and real estate market. This sounds like a return to the more healthy market place that Denver has, for the most part, sustained over the years. So there it is, a healthy forecast of sorts, but more importantly the reminder to realize that real estate is a big picture investment.
If you have further questions or have any real estate needs please contact Sam DeStefano at 303.594.1048 or firstname.lastname@example.org