What the heck is going on with the Denver real estate market?

October 2023 Edition

Well, we have hit the seasonal depression in the market that is typical for this time of year. Also, the high interest rates exacerbates this slowness. However, the market is still resilient and strong.

This is not an ideal time to sell. Sellers should expect longer days on market, offering concessions, and negotiation power swinging to buyers. Between now and through the winter we should see a softening in activity and prices, thus IT IS A GOOD TIME TO BUY! I’ll keep saying it. But only if you’re in a solid position to buy and can afford a home.

Here is my take on the next 12-18 months, with a few disclaimers and caveats: I have no crystal ball; I don’t take into account Acts of God; and I tend to take a more positive slant on my outlook on life.

Over the next year, I think that we will see mortgage rates staying generally above 7%, but hopefully rates will start trending down in the latter half of 2023 and into 2024. People will settle into these rates and continue buying and selling as life events prompt them to do so. Buying power will be lessened as a result of high interest rates, and home prices will remain steady even trending upwards, especially in Denver.

The seasonal trends will continue with Spring/Summer being prime seller seasons, and Fall/Winter being prime buyer seasons. Home builders will continue to build in an attempt to put more supply into the market. Many renters will be priced out of purchasing homes and will continue to rent, but rental rates will increase along with inflation.

Here’s where things get interesting... Once rates start trending down, which I’m confident they will eventually, many buyers and sellers who have been sitting on the sideline will get back into the market. According to a recent report by Redfin in July, roughly 4 in 5 homeowners have an interest rate below 5%, and nearly one quarter have a rate under 3%. The demand for homes when rates retreat will be high, but supply will be slow to catch up to meet demand, thus driving home prices even higher.

Prospective buyers should not expect and hope that both rates and home prices go down. In a high-demand market like Denver, prices will continue to rise higher and higher as rates begin to trend down. But let’s keep these factors in mind:

• 2024 is an election year.

• The Russia-Ukraine War remains unresolved, and there are increased tensions among the world powers. 

• There is fresh conflict and unrest in the Middle East.

• The US dollar continues to weaken.

• There is a monumental shift in the insurance industry, as a result of the many weather events.

• Inflation is still relatively high; the Fed continues to do what they do.

All of these factors can and will play into the world and US economy. How it affects the US housing market remains to be seen.