COLORADO - Colorado's real estate market continues to be a seller's market, and there is a strong potential for continued home price appreciation, especially in the Denver area. Rents will also increase, but interest rates will remain historically low. Several factors are driving this growth, including increased consumer confidence and the emergence of a new generation of buyers.
Denver housing market is experiencing a seller's market
The Denver housing market is once again a seller's market. This is contrary to the trend of recent years when buyers were forced to make offers sight unseen. Inventory levels are extremely low, and homes are sitting on the market for an average of 13 days. That's nearly 30% longer than they were in June. Buyers can improve their chances of snagging a home by expanding their search radius and negotiating features. Buyers can also increase their chances of success by lowering their expectations and being flexible with their needs.
While the Denver housing market is still in a seller's market, it is no longer as skewed as other markets. The housing bubble in 15 metro areas nationwide exploded in 2008 and did not recover to its expected values until 2016. During that time, Denver homebuyers paid a premium for homes that were below market value.
Interest rates are still historically low
Although interest rates have recently shot up, home inventory is still low, and prices are rising. Some prospective home buyers may decide to hold off on purchasing until 2023. This can be a wise move. However, it is important to consider your financial situation and life goals. A delay may lead to missed opportunities. In the meantime, you can prepare by making small adjustments to your finances and setting a budget.
While home prices have continued to appreciate, Fannie Mae has forecasted that prices will slow in the coming year. In the second half of 2022, annual home price appreciation will return to a single-digit rate. By 2023, annual home price appreciation will be below the rate of inflation. While the 2023 market could be less than ideal for buyers, there is no need to panic.
Rents are likely to continue to rise
Rent growth is positive across the board, but the pace has slowed a bit from last year. However, rent growth in Colorado is expected to continue rising in the coming years. The pace of rent growth in Colorado will likely be faster than in most other states.
This is based on trends in gross rent estimates from FY 2021 to FY 2023. The trend factor is calculated for each CPI region and area. HUD then chose the model with the lowest RMSE. The result is a fairly accurate projection for rent in Colorado.
The changes in calculation methodology made by HUD are designed to incorporate more local rental market inflation data into FMRs. In addition, HUD performs a recent mover adjustment for all areas in the calculation process. This is intended to make the FMR a more accurate estimate of rents as of FY 2023.
Home prices are expected to rise in the Eastern Plains
The housing market is still a seller's market in Colorado, but the outlook for the next year looks brighter. Home prices are predicted to rise but at a slow but steady pace. The lack of housing inventory is one reason why prices are not rising as quickly as they once did. As a result, buyers should act quickly to secure a property. Meanwhile, sellers should prepare themselves for increased competition.
The Zillow Group recently updated its housing market forecast. The company said that home prices will increase by just 2.4% in the year ending July 2023 and 6.9% in the year ending June 2023. The report noted that prices of existing homes will remain below the peak levels in 2023 as inventory declines.
Rents are likely to continue to rise in the Larimer and Weld counties
The recent spike in home prices has resulted in high demand for rental units. However, rising mortgage costs are preventing some renters from purchasing a home. Another contributing factor is the chronic housing shortage. The Federal Reserve Bank of Dallas estimates that by 2023, rents will increase at an average rate of 8.4% per year.
According to ApartmentList, rental rates are already soaring. From March to August of this year, the median rent in Denver, Fort Collins, and Greeley has increased by 10.2% yearly. However, the increase in Rent in the Larimer and Weld county areas has slowed down slightly. In July and August, rental rates rose 13.8%, while those in Colorado Springs and Fort Collins increased by 9.2% and 14.4%, respectively.
