Zillow predicts metropolitan Denver could see another year of house price increases of over 15% – The Denver Post


Predictions of what will happen to Colorado house prices next year after two years of unruly gains are everywhere – from the good times in 2022 to a return to more typical annual increases to some warnings that markets like the Metro are overstretched Denver could see prices starting to reverse.

The direction of interest rates and the severity of the pandemic will play a role in how much momentum real estate markets can maintain. Let’s start with the bullish camp, led by Seattle-based Zillow, which is calling for a 17.5% increase in metropolitan real estate values ​​in Denver over the next 12 months, all the more notable given that Zillow’s Denver Index is at a record 22, 1% profit this year.

“Monthly price increases slowed this summer, but recently accelerated again, and the smoothed monthly price increases are now 1.33%. If this monthly pace were sustained for a full year, it would be around 17% appreciation, similar to our forecast for the year ahead, ”said Jeff Tucker, chief economist at Zillow, in an email.

Mountain real estate markets will generally be hotter than Front Range, with Breckenridge up 29.4%, Edwards up 25.8%, Steamboat Springs up 23.4%, Durango up 22.1% and Boulder down 20, 7% in the next 12 months was Zillow’s forecast, which calls for national growth of 14.3% by November 30 next year, after a growth of 19.3% this year.

Tucker said a severe lack of supply is driving oversized price hikes in Denver and other metro markets. The inventory of homes for sale in the Denver metropolitan area is down 39% year over year and 55% compared to two years ago. This represents the second largest decrease in the number of the 50 major underground railways recorded.

Since the real estate crash more than a decade ago, home builders have not kept pace with demand, leaving the Metro Denver market underserved at 64,209 homes, compared to what would have happened if home builders stepped up with construction volume between 1985 and 2000 Loose mortgage loans distorted demand, Zillow said.

While owners, not renters, could see another year of double-digit house price increases, most forecasts for the next year in the Denver metropolitan area call for more normal single-digit profits. For example, Realtor.com predicts that home sales in the Denver metropolitan area will increase 6% and home prices 5% over the next year, based on a recent average price of $ 615,000.

Higher interest rates and lower affordability will reduce demand while home builders go full throttle and more people are listing their homes, predicts George Ratiu, manager of economic research at Realtor.com, in an email.

Realtor.com found in a nationwide survey of homeowners this fall that 26% plan to list their homes in the next 12 months, compared to just 10% who said so this spring. Ratiu also points out that by October this year, the Denver Metro had received 57% more housing permits compared to the same period in 2020. While the biggest gains are in homes, new home buyers should have a lot more choice over the next year.

“The influx of new homes will give Denver buyers more options and ease the pressure from double-digit price increases over the past five months. Slower price growth will be welcome news for first-time buyers, especially as mortgage rates are projected to rise to an average of 3.3% in 2022 and markets align more closely with 2017-19 trends. before the pandemic, ”he said.

According to the US Bureau of Labor Statistics, the cost of housing in the Denver metropolitan area increased 4.9% per year in November. A 5% increase in home value would allow homeowners to easily keep up, assuming home inflation doesn’t continue to rise, which it potentially does.

CoreLogic, which posted a record 19.5% per annum gain on its single-family home price index nationwide through October, now expects an appreciation rate closer to 2.5% per annum from now on. In the greater Denver area, she is demanding that house price increases slow down from the current 18.5% annual appreciation rate to an increase of 1.1% per year.

“Frenzy is the word,” said Frank Nothaft, chief economist at CoreLogic, when it came to describing what happened in Denver and other markets after the initial block orders were lifted. Homes have been selling at a breakneck pace, half the list price, which is unprecedented, and the inventory of homes for sale has plummeted to all-time lows. And as if it weren’t tight enough, investors have grown massively in recent months and achieved almost a fifth of sales.

Necessarily contradicts those who argue that US housing markets are in a bubble. Mortgage lenders have followed much stricter standards and there is no oversupply of home ownership compared to 15 years ago. Another big difference this time around is that the owners have an unprecedented amount of equity in their homes. Borrowers who skipped payment during the pandemic and are mostly not getting back on track should be able to sell and exit with money in their accounts.

Although the number is lower, some analysts urge caution. Professors from Florida Atlantic University and Florida International University run a rental-purchase index, citing Denver, Dallas, Houston, Kansas City and Seattle as the subways most at risk of falling prices in the coming months.

“Home prices have skyrocketed so quickly in these five metros, and the potential for short-term price drops is just too great,” said Ken Johnson, deputy dean of FAU’s College of Business, in his latest report. “There is strong evidence that home prices in these markets are well above their respective long-term price trends.”

Denver renters who have the discipline to invest whatever they save by not buying on the stock market will do better in the long run given how high home prices are now, he said. Johnson is not asking for a repeat of what happened from 2008 to 2011, when home prices fell in many parts of the country and foreclosures skyrocketed. But that doesn’t rule out a period of weaker or even falling prices that anyone buying in an upscale housing market like Denver should be prepared for.

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