“How’s the real estate market?”
Because of what we do for a living, as Realtors we find that we are asked this at least once a day. We love this question because it lets us talk about our favorite subject: the always-changing, ever-fascinating real estate market!
There are a lot of different factors and metrics that we can use to assess our current market, such as:
- Rising home prices
- Overwhelming consumer demand for homes
- New construction not keeping up with demand for housing
- Rental prices skyrocketing
- The effect gas and oil prices have on housing
- What parts of town have appreciated more than others over time
- How low interest rates are continuing to make housing relatively affordable
- And on and on and on…
However, when explaining our real estate market, my favorite metric to use is the chart below. Please take a look, and begin to consider what it is telling us.
What you see are two lines, a green one and a blue one. The green line shows the inventory (i.e., the number) of homes for sale in metro Denver every month. The blue line shows the number of homes sold every month. You can see that the inventory peaked in July 2010 at around 23,000 homes for sale. In December 2018, there were around 7,500 homes on the market. Although this number sits a little above the average for January, this is still considered to be extremely low inventory. This lack of inventory defines our current housing market.
The past several years have seen a very strong real estate market in metro Denver, and this chart explains exactly why. It is interesting to observe that while the green inventory line has dropped dramatically during the past few years, the blue number of sold properties has barely climbed upward, even though our population continues to rise about 1.5 percent per year. This statistic tells me that our demand for housing is going to stay strong for the foreseeable future.
So, how do you use this information? It depends, of course, on your unique situation. Here are a few ways you can use this info:
If you own a home and are thinking of moving:
It is currently still a seller’s market and you are likely able to receive top dollar for your home. I encourage sellers to list their homes early on in the spring season, before the market becomes cluttered. As always, it is incredibly important to price your home correctly! When you are ready, contact me to discuss what your home may be worth.
If you are considering buying a rental property:
There is no better way to build wealth than owning rental properties for the long term. There have been over 50,000 new apartment/condo units over the course of six years, giving investors ample opportunity. However, the majority of this new construction has been within the luxury market, so the opportunities are skewed in favor of more expensive investment properties.
Do not try to time the real estate market; it is as difficult to do as timing the stock or bond market. The vast majority of Americans who have built wealth as real estate investors have done it by purchasing rental properties and having their tenants pay the mortgage off over time. It is not complicated, and it works. That being said, I believe now is a great time to invest in rental properties around Metro Denver. I believe this because Denver’s population is still expected to increase by 50,000 per year. With new property tax laws, it is a real possibility that we will see this pace increase slightly thanks to how low Colorado property taxes are compared to other states.
With all of this general information, it is important to remember that everyone’s situation is unique. If you want to talk about how to best take advantage of our real estate market and see what it can do for you, please give me a call!