2018 Northern Colorado Real Estate Forecast
The 2018 real estate market forecast is much the same as in recent years. That is, Colorado still has a growing economy, there continues to be a large amount of people moving to the Front Range, home values are still increasing and overall things are looking good for the long term. The main difference is that while these positive factors are consistent, they will improve at an increasingly slower pace.
The real estate market in 2017 had continued growth as predicted (see 2017 Northern Colorado Real Estate Forecast). For Northern Colorado, the median home price rose 10.8%, year over year as of November 2017, according to data from IRES MLS®. Looking ahead to 2018 will read much the same way as it has in the last couple of years. That is, since 2015, while property values are increasing, they are doing so at a steadily slower rate. For 2018 it is predicted that home values will appreciate at a rate of 3%-5% for the greater Denver area, according to the 2018 Colorado Business Economic Outlook. Research compiled in this report, put out annually by the Leeds School of Business at University of Colorado in Boulder, shows that there are many contributing factors to our current real estate market. Below are a few of the highlights from their research.
Colorado is one of the top 10 producing states in the country. Our state ranked 3rd in Gross Domestic Product (GDP) for 2017, up from 4th place in 2016. As of September 2017, Colorado’s labor force increased 3.7%, year over year. This is the fastest labor force increase in the country. It is projected that job growth will continue at a slower rate in 2018 with a total of 47,100 new jobs vs. 56,300 jobs created in 2017. Most of the job growth for 2018 is expected to be in Education and Health Services; Professional and Business Services; and Trade, Transportation and Utilities. However, growth is expected in all sectors.
Additionally, Colorado’s unemployment rate is at 2.5%, the second lowest rate nationally. This is a great improvement since 2010 when the unemployment rate was 8.7%. This speaks to a strong and growing economy.
Colorado’s Population Growth:
Colorado continues to have a significant amount of people moving to the area. The most recent data in 2016 shows a net migration (in-migration minus out-migration) of 60,000, ranking Colorado with the sixth highest rate in the country. It is projected that the net migration for 2018 will be roughly the same. When paired with natural increase (births minus deaths), there is projected to be an additional 30,000 added to the population for a total of roughly 90,000 new Coloradans. The rate is slowing from the nearly 100,000 increase in population in 2015, yet Colorado is still growing at a rapid pace compared to the rest of the nation as a whole, nearly double.
How does the growing economy and population impact the real estate market? It makes Colorado a more desirable place to live versus other areas of the country. The influx of people that need a place to live has created a significant lack of housing inventory. The high demand for housing has caused the skyrocketing property values we have seen in recent years. On one hand this is good in that it creates significant equity for homeowners. The flipside of this is that many people, especially those with low wage occupations, find it difficult to afford a home, especially one that is close to their place of work.
The solution? More new construction. The good news is that builders have been creating new neighborhoods at a pace not seen since 2006, just prior to the housing crisis. The not so good news is that most residential new construction along the front range is priced too high for low wage earners. Hopefully, builders will consider this in future development.
What to watch for this year:
- Amazon. Will Amazon set up their 2nd headquarters in the Denver area? Colorado is still in the top ten states for consideration. The amount of jobs this could bring as well as high wage earners would have an impact on the local economy, especially the housing market.
- New Construction. Will new construction continue to close the gap on our low inventory problem? This will help to balance our market and further slow property value appreciation. Further, builders are struggling with a labor shortage. This will need to be resolved to help developments move forward smoothly.
- Affordable Housing. Many people cannot afford a home above $300,000. Unfortunately, most new construction is geared toward higher income buyers. Residential resale properties in this price range often have multiple buyers, many with cash, that makes it difficult for buyers with limited cash reserves to compete. The solution will come as the market balances due to greater inventory and months supply (around 6 months is ideal). Further, if builders target lower income buyers this will help many get into a home.
- New Tax Laws. With new tax laws that benefit corporations, will we see increases in hiring and wages for local employees? Will we see more startup companies that will provide good wage-earning jobs? Paired with tax cuts for the middle class, these changes could prove favorable for many who want to buy a home.
- Mortgage Rates. Rates have been hovering around 4% this year overall. If it stays at this level the impact to purchasing power for homeowners is minimal. However, if rates increase significantly it will have a negative impact on what borrowers can afford in a home at all levels.
2018 Annual Colorado Business Economic Outlook. Leeds School of Business, University of Colorado Boulder.
2017 Colorado Real Estate Forecast. Sean Gilliam, Realtor®
New Construction: The Solution to Low Inventory. Sean Gilliam, Realtor®
IRES MLS® Information and Real Estate Services LLC
About the author: Sean Gilliam is a Realtor® with RE/MAX Alliance in Northern Colorado and is a Certified New Home Specialist™. Sean can be reached at firstname.lastname@example.org or by phone at 970-313-6706. For additional articles see Sean’s blog or to search for properties see his web page.
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