Denver Real Estate Will Keep Going Up
In 2022 [And Here’s Why]
Hi there.
This is Shaun your self-professed real estate expert.
Of course, I have to say that, but the reality is I get all my good advice from my super-smart friends and associates.
Yes, I have been in the real estate industry since 2004, and yes I have done some deals,
But the truth is I never stop relying on advice from people smarter than me.
My Friend is a Real Estate Guru [Not Me]
On the weekend I met up with a long-time colleague and great friend who I met 10 years ago at a real estate conference thing.
We caught up for a coffee at m local favorite and treated him to a ridiculously delicious cinnamon bun!
Of course, we talked about family, friends, and life.
But most importantly we talked about Denver Real Estate.
AND even more importantly he gave me his thoughts as to why Denver house prices will go up for the foreseeable future (think Summer 2022).
I have to say I really like listening to what he has to say because it’s easy to understand and it just makes sense.
So here it is.
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What My Friend the Real Estate Expert Said:
This is the summarized version of course.
House prices will keep going up in Denver because of these reasons:
- Lack of inventory – specifically we are not building enough houses
- Cheap money
- People are very anxious that they are going to miss out
So now let’s break that down a little.
Denver’s chronic lack of inventory.
It is not the easiest economic environment to build right now. No one wants to work and those that do are demanding very high wages. The cost of materials is really high AND various building departments are rather backed up.
Long term this has been an issue because we haven’t been able to build houses at a price low enough to warrant doing it on mass.
AND MORE IMPORTANTLY, THERE IS NOT A WHOLE LOT OF LAND TO THE WEST OF DOWNTOWN DENVER
If we made lots of money building houses we would build more! However, even if we made a trillion dollars and there was no land we couldn’t build right.
IS THE CITY TO BLAME:
Government is always to blame to some degree. Government officials sit in silos, removed from the real world, thinking they helping by implementing change when really it’s hurting.
I don’t know any specific new rules or regulations that are hampering building right now, but it’s definitely an ongoing battle.
The battle is enough regulation to make sure builders are building quality products and not too much regulation that the regulations become cost-prohibitive.
I have heard that Denver Housing plans to build a bunch of houses. But it’s a drop in the bucket. We need 10 thousand 20 thousand or maybe 50 thousand houses to catch up and they are planning 1300 new houses. They will build 300 a year.
I am happy they are trying but obviously, it’s not really going to make a difference.
At the end of the day, Denver and Colorado is a great places to live. The infrastructure is fantastic too. Therefore people and companies will keep coming here. AND houses will have continuing demand.
So why not build more houses in the east on the plains?
This all said there actually are plenty of builders putting up new houses on the outskirts of Denver. This doesn’t reduce the prices all that much in the inner suburban areas that are more desirable.
House prices in the inner suburbs are rebuilt or renovated. This doesn’t add more houses. Just makes the ones we have more expensive, right?
Denver House Prices [6 Months from Now]
I see them continuing to go up through the summer.
Hopefully, the government will start to put an end to the madness that is cheap money. I am not sure that they will though.
Denver House Prices [12 Months from Now]
12 months is a long way off. Especially when you are asking me about a real estate market that is so hot. We have seen years of appreciation. This is certainly the longest and largest upcycle I have ever been part of.
I really hope we start to see house price appreciation slow and even go stagnant. I think the housing market would become “healthier” if there was a period of less appreciation, no appreciation, or even negative appreciation.
So you want house prices to go down?
No, I am not saying I want them to however I don’t think it would be terrible if they did go down some. The worst thing is that people, homeowners, become very anxious when prices drop a little.
You don’t need to be though. It’s all part of the normal ebb and flow of the markets.
Top 3 Things Driving Up House Prices
- Cheap interest rates
- Not enough houses to buy (supply and demand)
- Cost of renovating and new building – both materials and labor
Buyers Market or Sellers Market
Absolutely a sellers market.
Is Denver in a Real Estate Bubble?
I asked my friend
“Are we in a bubble? Is the Denver housing market about to burst?”
His response:
Yes, no maybe?
When people are we in a bubble there is a tone/suggestion that it can burst and overnight house prices will go down by 10%, 20%, or 30%.
This never happens.
Even in the great recession, the prices dropped over several years.
They dropped a lot but over a long time. Quite different to the stock market which can drop overnight.
I do believe house prices are about as high as they should be relative to everything else right now. I say this because they are higher than they have ever been relative to most things.
I believe the market needs to cool off. I don’t think we are in a bubble that will burst. So maybe we are at the top of a hill and we are about to go down the other side for a little bit.
Fair?