Our team at CHR recently met with one of the nations foremost real estate economists, Elliot Eisenberg P.h.D. (please listen to him if you get the chance https://econ70.com/ ).  

For many reasons, we were prepared for future housing market bad news from Elliot.  But what we heard remained consistent with our own analysis and for Colorado in particular, was incredibly positive.

According to Elliot, There are a handful of primary factors influencing his favorable long term Colorado housing forecast.

  • Interest Rates are already falling and for a host of reasons, are almost certain to continue their decline well into 2025.
  • The vast number of homeowners who own a home with an interest rate below 4% and won’t move until rates get lower, ensures we won’t experience a flood of sellers hitting the market and thus crash home prices due to oversupply.  
  • We will experience an increase in real estate market volume for the foreseeable future with a decline of interest rates.  More sellers will finally feel comfortable selling, knowing they can get a new home interest rate close to what they have on their current home, and while more sellers means more supply, that same interest rate decline will spur even more buyers to market.  
  • A nationwide housing shortage of about 3 million homes driven by conservative building and lending practices since the end of the great recession in 2011. At the current pace of construction, it will take decades for our housing shortage gap to close and this shortage drives upward pressure on prices.  
  • Colorado’s population is stable to slightly growing and changing demographics.
  • Colorado is becoming wealthier due to affluent in-migration from coastal cities.  Many of the people moving to Colorado think real estate is relatively inexpensive compared to where they come from.  Their purchasing power will continue to drive prices up.
  • Colorado has an incredibly diversified economy creating long term ideal stability and a platform for continued growth from technology to finance, fossil fuels to clean energies, major healthcare institutions, aerospace, agriculture, ranching and mining, telecommunications, tourism and more.  

Elliot’s conclusion on Colorado real estate is that we are simply one of the “sexiest” housing markets in the country and all signs point to stability and growth.  

While Elliot was incredibly bullish on real estate, the news wasn’t all roses.  

Elliot shared compelling evidence that the United States economy is headed for a recession.  With a national debt of $35 Trillion dollars, personal savings rates historically low, household debt historically high, the Federal Reserve likely acting too late in lowering interest rates to protect manufacturing, jobs and business growth, and a questionable jobs market, Eolliot’s only question is, will the recession be a “hard or soft landing?”  

Our advice, as it has been for over 24 months, keep a little extra money in reserve, reduce personal consumption expenditures and work closely with your financial advisor on the diversification of your assets.  

While real estate has all signs of great stability, the equity markets shown some caution signs. 

Colorado Housing Update

With a decline of interest rates, increased buyer activity has driven relative price stability for this time of year.  Since early April, the median home price in the 7 county Denver market has been consistently around $665,000, or about 3% above 2023 over the same period of time.  

While prices have been stable for longer this year, consumers should anticipate the typical Colorado seasonal price decline through year end.  

Already, more than 64% of properties are selling below the original asking price and both buyers and sellers should expect that percentage to increase through year-end.

Currently, 44% of homes listed for sale experience a price reduction and its likely that number is well north of 50% by the end of 2024.  

It is easy to interpret these market conditions as bad news, but they are not.  This is seasonal Colorado real estate influenced by a combination of higher interest rates and the highest inventory of homes available for sale, in 13 years.  

Last week, the inventory of homes available for sale jumped by more than 5%, ending with 10,386 homes available for sale.  This is a 60% increase over last years inventory of 6,595 homes and a 200% increase over 2021’s all time low 3,766 homes.  

However, a balanced supply and demand market for a population the size of Denver requires a home inventory of approximately 15,000 to 18,000 homes.  While home sellers aren’t loving their price reductions, offers below asking or the time it is taking to get a home sold, Denver still has a housing shortage and incredibly low inventory.  

This is just one more factor pointing to a likely busy 2025 spring real estate market that is poised to see decent home value appreciation.  

Buyer and Seller Recommendations

Sellers should be prepared for prices to decline through year-end.  Most offers to purchase will be below the asking price and the majority of sellers will need to reduce the offer price for their home before the end of the year.  Time on market will expand and competition will increase with rising inventory.  

While this isn’t thrilling for sellers, sellers who are buying a replacement property would do well to remember that while they are selling their home in market conditions that are largely buyer favorable, they will also be buying with these same conditions.  

Buyers today are able to capitalize on what appears to be an incredibly stable housing market with tremendous upside potential, the lowest interest rates in almost two years, and a strong inventory of motivated sellers that creates an opportunity to negotiate favorable terms.  

While prices will decline through year-end, this 4 month buying window of September through December 2024 may prove to be the best real estate buying opportunity we’ve seen since mid-2020.  

Buyer’s should anticipate rising prices next spring, along with a continued decline of interest rates.  Buyer’s who are comfortable buying now may have the best circumstances of buying at a discount, getting a great interest rate today, experience home value appreciation next spring and potentially have the opportunity to refinance into an even lower rate, if rates continue to fall.