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

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.

We still have lots of room for the market to grow and sell more homes. Your Castle Real Estate did an analysis looking at the housing market for the past 40 years in order to see how we are faring today. The dotted line on the chart is the number of home sales we would expect in any given year based on the population of metro Denver. As you would expect, during downturns fewer people buy homes and during upturns more people buy homes. Looking at the chart you see that we have had a fast rising number of sales the past few years but we do not appear to be anywhere near oversold given our increased population, like we were in 2004 for example.

Taken all together, the data suggests that this strong market (read: seller’s market) is not heading for a downturn any time soon. As long as the inventory remains low we will continue to see a strong seller’s market and a continuing rise in prices in the 6-8% range. And I don’t see any indication that the inventory will rise any time soon. Please give me a call if you want to discuss what matters most – what you’re looking to do in the market. I’d be glad to help!