The recent Federal Reserve’s rate cut uncovers a hard truth for national real estate. The go-go appreciation of residential homes is a historical fact, now over. Higher rates kept in check investor willingness to overbid. Likewise, home resale supply is now increasing. Before foreclosure worries hit, consider that the market in places like Denver is trending normally vs at the extremes. Those who purchased or refinanced at historic lows are not likely to sell anytime soon. Those experiencing the classic five reasons behind home sales (marriage, newborns/kids, job relocation, divorce, death) will continue to enter and exit the housing market at a consistent rate. The mix between supply and demand in Denver’s metro market remains seller-friendly, dependent on the property’s location and condition. Median days on the market hovers around 35 vs the 15 days typical at the market’s peak. This assumes a properly priced home of course.
Going forward, the annual appreciation expected for a residential property in Denver will likely be in line with inflation. 2-3% growth will be the norm for unimproved residential real estate.
Per national stories, like the updates from Vincent Labs, home sales rate is at a historic low.
“Only 2.5% of U.S. houses have been sold so far this year, the lowest turnover rate in at least the past three decades, which represents a 31% drop in turnover since the last pre-pandemic year of 2019. High mortgage rates, low supply and political uncertainty are the main factors, as listings are also at the lowest level since at least 2012, the first year that data was tracked. Phoenix saw the highest turnover, while Los Angeles, Boston and San Francisco saw the lowest.”
The outlook from the MASONmodern team is:
Short-term Outlook (1-2 years)
- Prices may continue to soften slightly in the short term. The median sale price in 80209 was $978K last month, down 11.1% from last year.
- However, the price per square foot has increased by 1.2% over the past year, indicating some underlying strength in the market currently and going forward.
- The market will remain competitive, with some homes likely receiving multiple offers due to limited supply in desired communities.
Medium-term Outlook (3-5 years)
- Gradual Appreciation: Over the next five years, home prices are expected to appreciate, albeit at a more moderate pace than in recent years. Lawrence Yun, NAR’s chief economist, predicts a total appreciation of 15 to 25 percent over the next five years nationwide.
- Annual Growth: Expect low-to mid-single-digit annual appreciation, which is consistent with long-term averages of home prices increasing at a rate slightly above inflation.
- Market Balance: The market is likely to shift towards more balance between buyers and sellers over this period, moving away from the strong seller’s market of recent years.
- Interest Rates: Mortgage rates are expected to decrease from current levels, potentially returning to the 5.5-6% range within two years, which could support home values and buyer demand.
Factors Influencing Denver specific markets, like 80209.
- Local Desirability: 80209 includes desirable areas like Washington Park, which may help maintain property values even in a cooling market.
- Denver Market Trends: The broader Denver market has shown resilience, with a 2.6% increase in home prices compared to last year, which could positively influence 80209 sales.
- Inventory Levels: An 11% increase in new listings across Denver has led to the highest home inventory in over ten years, which could moderate price growth.
- Economic Factors: Denver’s job market and population growth are key in sustaining housing demand.
Conclusion
While select neighborhoods, like homes in 80209, may experience some short-term softening, the medium-term outlook (3-5 years) suggests a return to steady, moderate appreciation. The area’s desirability and the overall strength of the Denver market are likely to support property values, even as the market becomes more balanced. However, as with all real estate forecasts, these predictions are subject to change based on broader economic conditions and local market factors. For available luxury homes visit masonmodern.com today.
