<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=1509788629317365&amp;ev=PageView&amp;noscript=1">

A 10 Year Look at the Denver Real Estate Market

Posted at 05/01/2021 09:27 AM by Jennifer Black

denver skyline  a 10 year look at the real estate market in denver

No one can deny that the Denver Real Estate market has changed dramatically over the last decade. In a drastic example of this, the median sale price of a home in Metro Denver in 2009 was $215,252. Fast forward to 2020 and the median sold price jumped to $449,900 (Data courtesy of Megan Aller | First American Title and includes the counties of Adams, Arapahoe, Broomfield, Denver, Douglas, Elbert, and Jefferson).

In this look back at the past 10+ years of the Denver Real Estate Market, we wanted to examine a few particular questions:

  • What has been the trend on housing prices in Denver over the past 10 years?
  • It's been 10 years since the housing crisis, are we due for another one soon?
  • What is the story behind the low inventory in Denver?
  • What are the seasonal trends in the Denver housing market?

KEEP_ MONTHLY BLOG CHARTS-1

What has caused the increase in Denver's home prices?

1. Low Inventory Plus Incredible Buyer Demand

It should come as no surprise that there is an extremely low supply of inventory. Denver has struggled with a lack of inventory since 2011. Strong demand in 2020 drove intense competition among buyers, causing homes to sell incredibly fast and pushing prices higher. For comparison, at the end of 1990, there were 11,839 homes for sale in Metro Denver, and in 2020 there was an all-time low of 2,541 (DMAR). And more homes sold than ever before in a calendar year as well, decreasing the supply of available homes. Homebuilders have been unable to keep up with supplying new homes at the rate they are needed.

At the end of 1990 there were 11,839 homes for sale in Metro Denver, and in 2020 there was an all-time low of just 2,541 homes for sale.

4

2. The Economy + Lifestyle

best breweries in denver co

Low unemployment for the past decade, lifestyle desirability, and a strong economy also contributed to the rise in home prices. Since 2010, Denver has had a 25 percent increase in employment.

Of course, 2020 and COVID-19 threw a wrench in that, with unemployment jumping from 2.7% in 2019 to 7.4% in 2020 (First American). However, many new companies have recently moved to Denver, bringing along relocated employees and attracting new ones. Colorado offers tax incentives to attract large employers, plus Denver is a great place to live thanks to its plentiful sunshine, invigorating outdoor activities, strong neighborhood character, and a myriad of independent businesses, including tons of coffee shops, restaurants, and breweries.

Unemployment Rates in Denver

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
8.2 % 8.7 % 8.4 % 7.8 % 6.6 % 4.8 % 3.7 % 3.1 % 2.7 % 3.1 % 2.7 % 7.4 %
This representation is based in whole or in part on content supplied by REcolorado®, Inc. REcolorado®, Inc. does not guarantee nor 
is it in any way responsible for its accuracy. Content maintained by REcolorado®, Inc. may not reflect all real estate activity in
the market. Dates shown on graphs for timeframes included. Adams, Arapahoe, Broomfield, Denver, Douglas, Elbert, Jefferson. Data
courtesy of Megan Aller | First American Title
 3. Ability to Work Remotely + Population Growth

For over a decade now, Denver has been consistently growing in population. Since 2010, Denver's population has grown by 17 percent. Compared to nationwide statistics, Colorado is more popular as a work-from-home destination with 46 percent of the population reporting that they telework compared to only 35 percent of adults nationwide.

Luckily for Denver's economy, it was identified early on as a friendly city for telecommuters and the city's population actually grew. Between April and October of 2020, for every one person who moved out of the Denver Metro area, 1.34 people moved in. And we expect the growth in Colorado to continue into 2021.  A recent U.S. News & World Report ranked Denver as the #2 best city to live and Boulder #1. As more people move here and there continues to be a housing shortage (with no end in sight), prices will continue to rise.

3. Historically Low-Interest Rates

The U.S. saw record after record get broken in 2020 when it came to interest rates, encouraging buyers to get into the market. And the changes in rates are significant for home buyers' ability to "buy more house."

For example, say you buy a $450,000 home (the median sale price in 2020) and put 20 percent down. With a 3 percent interest rate, your monthly payment is around $1,517 a month (not including any taxes or insurance). If your interest rate goes up just half a percent to 3.5 percent, your monthly payment jumps to $1,616. So, as a general rule of thumb, you can estimate each half a percent increases your payment by about $100 a month.

Average Interest Rates in Denver

  2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Average Interest Rate 5 % 4.7 % 4.4 % 3.6 % 4 % 4.2 % 3.8 % 3.7 % 4 % 4.6 % 3.9 % 3.1 %
This representation is based in whole or in part on content supplied by REcolorado®, Inc. REcolorado®, Inc. does not guarantee nor 
is it in any way responsible for its accuracy. Content maintained by REcolorado®, Inc. may not reflect all real estate activity in
the market. Dates shown on graphs for timeframes included. Adams, Arapahoe, Broomfield, Denver, Douglas, Elbert, Jefferson. Data
courtesy of Megan Aller | First American Title
 

The Bubble Question

What makes today different than the pre-housing crash of 2008? Well, we do see some factors in the national market that are similar to what preceded the crash: rising prices, buyers aggressively pursuing homes, and yes, lots of flipping. However, there are notable differences as well.

What Caused the Housing Crash?

As cited by a Realtor.com analysis on housing and economic data, today's scenario indicates prices are not rising as a result of the expansion of mortgages to high-risk borrowers like in 2007. During that housing crisis, there was an influx of home buyers on the market in a short amount of time and the increase in demand synchronously increased prices. Thanks to readily available subprime mortgages, the number of homeowners shot up at an unusually high rate. Before 2007, "homeownership fluctuated around 65 percent, mortgage foreclosure rates were low, and home construction and house prices mainly reflected swings in mortgage interest rates and income," (Federal Reserve History).

The subprime mortgage problem was exacerbated when lenders began to repackage the high-risk mortgages into private-label securitizations and sold them in high volume to investors. For example, "Before the financial crisis, Wells Fargo packaged over $1 trillion of mortgages into private label securitizations. However, since the crisis, investors lost interest as large volumes of risky loans went bad." (Housing Wire).

What is Different Today Compared to 2007?

Loan Standards Have Changed

For one, we have much more stringent mortgage criteria today than back in 2007. Sustainable income and stable employment history are just two of the measures required to obtain a home loan today. The Dodd-Frank Act, passed with the intention of protecting consumers, has "rules like keeping borrowers from abusive lending and mortgage practices by banks." (CNBC). The median 2017 home loan FICO score was 734, significantly up from 700 in 2006. The low end of the range has pulled up as well. The bottom 10% of borrowers had an average FICO of 649 in 2017, up from 602 in 2006. Licensing is also a widespread state requirement for loan originators, officers, directors, and servicers, and those in the loan industry receive furthering education and can be audited by the state regulators (Housing Wire).

Product risk like balloon payments and teaser rates made up 40 percent of the mortgage market in 2004, 2005, and 2006. Today, those risky products only make up 2 percent of the market, according to Morgan Stanley.

Flipping

According to Realtor.com, "In 2006, the share of flipped homes reached 8.6% of all sales, exceeding 20% in some metros such as Washington, DC, and Chicago. Some of those flippers took out multiple loans to afford their properties. With today’s tight lending environment and limiting borrowing power, however, flipping accounted for a more reasonable 5% of sales in 2016." 

Demand and a Lack of Inventory

A decade of growth in the national economy (prior to the 2020 pandemic) caused record low unemployment, resulting in more steady jobs. However, home construction has not been able to keep up. As the median age of millennials rises into the 30s, it is estimated that 32 to 35 percent of millennials are now homeowners and that half of today's homeowners are under the age of 36 (Robb Report).

In 2006, there was an oversupply of homes. According to Realtor.com, 1.4 homes were built for every one new household. Today, we only have 0.7 homes being started for every one new household, causing an undersupply. According to a study by ApartmentList, Denver created 2.9 jobs for every one new housing unit between 2010 and 2015. This housing shortage is felt around the nation but is particularly high here in Denver.

"Construction of new units nationally hit a low point after the Great Recession, with the number of permits issued hitting a record low in May of 2009. While the industry has recovered, it still isn’t keeping pace with economic growth. The construction labor shortage—the number of companies building homes dropped by half between 2007 and 2012—has only exacerbated the problem," (Curbed). Furthermore, rent rose 52 percent in Denver between 2005 and 2015, increasing the number of people wanting to buy a home.

A balanced market in Denver would be a six-month supply of homes for sale. That number would be 23,868 active units (Land Title Guarantee Company). In April 2021, the Denver metro had just over 2,594 homes for sale. The last time Denver had over 23,000 listings was almost a decade ago in December 2011 (REColorado).

On a national level, the housing market is also experiencing a record low number of homes available for sale. At the end of March 2021, there were 1.07 million homes available for sale, according to NAR data. In July 2007, there were more than four times that—4 million available homes for sale (Realtor.com).

Market Report Instagram Feed (6)

 

2021 Predictions

denver neighborhoods-1

Housing in Denver is thriving. Home appreciation is up, the number of homes sold is up and days on market are down. So what makes us optimistic that this will continue in 2021? A few crucial components to be aware of:

Colorado Continues to be the Home State of Choice

As homes became our offices, gyms, schools and so much more, a new meaning of what home is has evolved. For those with the privilege and opportunity to work from home, new flexibility has been born out of the pandemic. And Denver and Colorado's population growth in 2020 goes to show people continue to choose Colorado. The population of the Denver, Lakewood, Aurora area grew to over 3 million residents in 2020, up from 2019's 2.967 million number. According to a study by LendingTree, Denver ranks #3 as the most popular city for millennials to buy homes.

Employment is on the Rise

According to the Denver Post, "From December 2019 to February 2020, Colorado had the fifth-lowest unemployment rate in the country at 2.5%. But the rate doubled in March as the pandemic swept in, pushing Colorado down to the 40th spot." While we have struggled to get back to healthy numbers, 80 percent of Denver area jobs lost due to the pandemic are back. As the income gap continues to widen, employment rates will be a major roadblock on the road to recovery and is ideally prioritized as such by local, state, and federal officials.

Interest Rates to Remain Low

According to the New York Times, the Federal Reserve is "hoping that by keeping interest rates low, they can boost demand in the economy and help set the stage for a job market recovery while also shoring up chronically weak inflation."

Housing to Grow More Unaffordable

There is only so much interest rates can do to help the affordability issue in Colorado. Without more supply, demand is nowhere close to being met and this will cause prices to continue to rise. New construction is expected to increase this year and will help slightly with the lack of supply but home builders cite labor shortage as a major problem. December 2020 ended with only 2,541 actives homes for sale across all 11 counties included in the report, down 39.17 percent from December 2019. For buyers of single-family detached homes, affordable housing continues to grow more out of reach. There were only 1,316 homes available at the end of December 2020 and a huge portion of those homes (400) being priced at or above $1 million.

Virus Remains the Wildcard

In recent statements by Jerome H. Powell, the Fed Chair, he made it clear they are less worried about inflation than they are about unemployment and "warned that allowing displaced workers to remain stuck on the job market’s sidelines could inflict lasting damage."

Development Going Strong in Denver

Denver's new construction is expected to increase in 2021. The Downtown Denver Partnership President and CEO Tami Door told the Denver Gazette that the Mile High City's economy is set to make a quicker recovery than other cities. Continued population gains and "the development projects still in the pipeline and the existing new developments like McGregor Square, 16 Market Square and Block 162," are encouraging signs of a recovering economy. CBRE ranked Denver in the top 10 for development opportunities due to favorable demand drivers like the quality of life, in-migration, and job growth.

See Homes For Sale in Colorado Mountain Towns

The Demand for Mountain Homes will Grow

Mountain towns like those in the Vail Valley, Crested Butte, and Telluride have seen major upticks in the number of home sales. According to Matt Wilson of Usaj Realty, "September [2020 in Vail] was a record-setting month for the highest total dollar volume of real estate ever, which was quickly surpassed in October. This is a permanent shift for Vail's housing market, and future homeowners will look to local area experts to navigate the area's highly competitive market." World-class skiing and resorts, top-notch restaurants, the outdoor lifestyle, incredible shopping, plus easy access to Denver, make the Colorado mountain towns more appealing now than ever.

Contact Usaj Realty

This article was originally published on Jan. 3, 2018
It was updated on May 1, 2021.

Posted by Jennifer Black

Jennifer Black champions all of Usaj Realty’s marketing publications. With a passion for digital marketing, graphic design, writing, and all things creative, Jennifer excels in the office as a crucial support staff member for our brokers and management Originally from Redwood City, California, Jennifer pioneered her way to Denver and began working for Usaj Realty in May of 2014. She loves every minute of life in Denver, which is directly enhanced by her time designing for Usaj Realty. Away from work, Jennifer enjoys escaping to the great outdoors, going skiing, hiking, and exploring local breweries and restaurants.

LinkedIn

Website

Topics: Denver Real Estate Market