The questions I’m most often asked these days are variations on the following: “How long is this strong market going to last?” “Are we at the top of the market?” or “Is the market going to crash any time soon?” This month I’m going to give you my thoughts on where I think we are in the market. The short answer is we haven’t reached the top, and I expect the strong seller’s market to continue for quite some time, probably several more years. Here’s why:
Inventory of homes for sale
The metro Denver market has about 3.1 million residents. A community of this size will have a balanced market when it has an inventory of 16,000 – 18,000 properties on the market for sale. Presently, there are approximately only 3,900 properties on the market, which is why it’s such a strong seller’s market. There are simply more buyers than sellers out there, resulting in multiple offers and price increases. It’s not just recently that our inventory has gotten so low; it’s been falling steadily since 2007 when we peaked at over 31,000 properties on the market.
In my opinion, the inventory of homes for sale is the single best indicator of how strong the market is. With such a low inventory, our seller’s market will continue for the foreseeable future.
Interest rates rocketed upwards in the spring of 2013 and every real estate expert imaginable declared the era of low interest rates over. Well, they all got it wrong. Today, interest rates remain near 50-year lows with the par interest rate hovering just above 4%, continuing to make homes affordable. Many of the buyers who are taking advantage of these low rates have rented for the past several years and are finding it more affordable to purchase a home than continue to deal with rent increases.