As we head into the new year, we thought it would be helpful to review what’s happened in the Denver housing market in 2017 and make some educated guesses about what the market might do in 2018.
Denver Housing Market: Changes from 2016 to 2017
According to Zillow’s October 2017 market overview for the Denver Metro area, the median home value was $372,800, an increase of 6.3% over the same time last year. Year over year, 90% of homes have increased in value. Zillow forecasts an additional increase of 3.5% over the next 12 months. Evergreen has the highest median home values, at $538,200, while Westminster has the largest annual change in home values: an 8.8% increase. The Denver metro area’s median list price was $432,900. Aurora and Northglenn have the most affordable homes; both have a median Zillow value of about $293,000.
For another perspective, consider the numbers from the Denver Metro Association of Realtors’ December 2017 market report. It shows an average sold price of $479,192 and a median sold price of $405,000, increases of 8.68% and 8% over December 2016. Condos are less expensive but have seen slightly larger gains, with an average sold price of $324,599, a median sold price of $272,000, and increases of 9.84% and 9.47%.
The website Rent Jungle says the average 1-bedroom Denver apartment rents for $1,385, a 1.44% increase over last year, and the average 2-bedroom apartment rents for $1,755, a 0.57% decrease since last year. Golden Triangle, Cherry Creek and Lodo have the highest rents; southwestern and northern Denver have the lowest.
Zillow calculated Denver rents at $1.50 per square foot for 2017, an increase of 1.8% over last year. The site puts metro Denver’s median rent at $2,035 compared to the national median of $1,432. Rents have increased the most in Sable Ridge, DIA and Heather Ridge. Zillow estimates that it’s financially better to buy in Denver if you plan to live there for more than 2.1 years (see our post, Rent vs. Buy: Is It a Good Time to Buy a House?).
Denver’s Super-Tight Housing Inventory
The Denver-Aurora-Lakewood metropolitan statistical area has one of the lowest residential vacancy rates in the country at just 0.56%, according to an analysis by Credit.com. San Jose-Santa Clara-Sunnyvale topped the list with a 0.23% vacancy rate.
Zillow’s forecast for next year says that the low inventory and sluggish building of single-family homes that characterized 2017 will likely continue through 2018. The December report from the Denver Metro Association of Realtors shows that the active inventory of single-family homes was down 11.90% year over year, though condo inventory was up 6.19%.
Finding a unit to rent isn’t the easiest task, either. Thanks to Denver’s apartment boom, the city needs to construct 55,801 new apartments from 2017 through 2030 to meet demand, according to projections by the National Multifamily Housing Council and the National Apartment Association. Denver has experienced significant growth in high-income renters who earn more than 120% of the area’s median income.
Sold Home Characteristics
The median single-family home sold in November had 1,720 square feet, while the median condo had 1,175 square feet. Most of Denver’s sold homes were in the $300,000 to $399,999 price range, followed by the $400,000 to $499,000 range.
Denver’s luxury market — homes sold for $1 million or more — has done especially well in 2017, with year-to-date sales up 30% compared to November 2016 (1,566 homes vs. 1,202). The average sold price is down 7% for single-family homes but up 18% for condos.
What to Expect in the Denver Housing Market in 2018
The Federal Reserve increased its target interest rate by 0.25% on December 13, and it anticipates making three additional 0.25% rate increases during 2018. The Fed Funds rate underlies all consumer interest rates, so we can expect mortgage rates to climb slowly next year. Rates will still be historically low, but they won’t be the rock-bottom rates we saw in 2015 and 2016. Higher mortgage rates mean consumers won’t be able to borrow as much unless their income goes up or their debt goes down. Sellers will still be able to command high prices as long as inventory remains tight, though.
Conventional loan limits will go up in 2018. The loan limit in most parts of the country will increase from $424,100 to $453,100, a 6.8 percent increase. More expensive parts of the country have higher loan limits. Denver County’s limit will be $529,000 in 2018. The higher limits increase buyers’ purchasing power, assuming they have the income and credit to support the additional borrowing.
Loan limits throughout Colorado range from $453,100 in many areas to $679,650 in Garfield and Pitkin counties, roughly 200 miles west of Denver and home of the Roaring Fork Valley, Aspen and Snowmass Village. Those who want to borrow more than the limits in a given area will need to get a jumbo loan.
We reported back in April that Denver’s new home construction wasn’t keeping up with demand. The Denver Metro Association of Realtors reports that a gap between supply and demand for new homes will persist, with 2018 construction estimated at 13,000 units for a demand of 16,000 units.
2017 was a great year to buy or sell a home in Denver because of the city’s rapid population growth, the many companies adding stores and corporate headquarters to the area, and the strong job market. In 2018, we expect more of the same. Millennials who want to buy and baby boomers who want to sell should continue to drive supply and demand in the Denver real estate arena. Political and economic changes could throw our predictions way off, but based on what we know now, next year should be another strong one for our city. If you’re considering renting, buying, or selling in the new year, let us know how we can help.