The following analysis of the Metro Denver & Northern Colorado real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact me.
Colorado’s economy added 57,100 new non-agricultural jobs over the past 12 months, a growth rate of 2.1%. The pace of job growth has been moderating and I anticipate this trend will continue as we move through 2020. My current forecast is for Colorado to add around 57,000 new jobs in 2020, a growth rate of 2.1%.
In November, the state unemployment rate was 2.6%, down a full percentage point from the same month in 2018. Unemployment rates in all the counties contained in this report were lower than a year ago and it is fair to state that all markets are now at full employment.
- In the final quarter of 2019, 14,279 homes sold, representing an impressive increase of 9.2% compared to the final quarter of 2018. However, sales were 18.7% lower than the third quarter, which I attribute to seasonality. Pending sales — a sign of future closings — dropped 26.7% compared to the third quarter, suggesting that closings in the first quarter of 2019 are likely to come in below current levels.
- It is notable that all counties contained in this report saw sales growth compared to the same period a year ago.
- Listing activity in the quarter essentially matched the same period in 2018 but the number of homes for sale was 26% lower than in the third quarter of the year. Again, this is a function of seasonality.
- Inventory levels are holding steady, and demand for housing continues to be strong. I would certainly like to see inventory levels rise and I remain modestly hopeful that this will be the case, but likely not until the second half of 2020.
- Home prices continue to trend higher, with the average home price in the region rising 4.3% year-over-year to $473,264.
- Interest rates remain at very competitive levels and are likely to stay below 4% through 2020. This will allow prices to continue to rise, though I expect more modest price growth if there is an increase in the number of homes for sale.
- Appreciation was strongest in Boulder County, where prices rose 7.4%. Home prices dropped in Clear Creek, Park, and Gilpin counties, but these are small markets so I don’t believe it’s indicative of an ongoing trend.
- Affordability remains an issue in many Colorado markets and this will act as a modest headwind to ongoing price growth.
DAYS ON MARKET
- The average number of days it took to sell a home in the markets contained in this report rose three days compared to the final quarter of 2018.
- The amount of time it took to sell a home rose in all counties other than Clear Creek when compared to the fourth quarter of 2018.
- It took an average of 41 days to sell a home in the region, an increase of 11 days compared to the third quarter of this year.
- The Colorado housing market is still performing well and the modest increase in the length of time it took to sell a home is not a concern at the present time.
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
For the fourth quarter of 2019, I am leaving the needle at the same level as in the third quarter. Listing activity has not grown, and this has led to higher prices in general. Although market time has risen, the market still favors home sellers.
ABOUT MATTHEW GARDNER
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
Geopolitical uncertainty is causing mortgage rates to drop. Windermere Chief Economist, Matthew Gardner, explains why this is and what you can expect to see mortgage rates do in the coming year.
Over the past few months we’ve seen a fairly significant drop in mortgage rates that has been essentially driven by geopolitical uncertainty – mainly caused by the trade war with China and ongoing discussions over tariffs with Mexico.
Now, mortgage rates are based on yields on 10-Year treasuries, and the interest rate on bonds tends to drop during times of economic uncertainty. When this occurs, mortgage rates also drop.
My current forecast model predicts that average 30-year mortgage rates will end 2019 at around 4.4%, and by the end of 2020 I expect to see the average 30-year rate just modestly higher at 4.6%.
The last time we saw a balanced market was late 1990s, meaning many sellers and buyers have never seen a normal housing market. Windermere Real Estate’s Chief Economist Matthew Gardner looks at more longer-term averages, what does he see for the future of the housing market?
Windermere Real Estate Chief Economist Matthew Gardner explains the ways zoning rules and regulatory costs can limit housing affordability.
Windermere Real Estate Chief Economist Matthew Gardner explains how restrictive growth policies are affecting housing affordability in many cities.
Luxury homes sales across the U.S. continue to perform strongly, but I’m noticing some headwinds starting to appear that are worthy of a closer look.
It’s often thought that luxury real estate runs totally independent of the overall market, and while this is true in some respects, there are definitely correlations between high-end housing and the rest of the market.
The first similarity is that the luxury market has suffered from some the same inventory constraints that are almost endemic across all price points in the U.S. But, similar to the overall market, we are starting to see a rise in inventory, which should be good news for real estate agents and luxury home buyers alike.
Impact of rising inventory
This increase in the number of luxury homes for sale has started to have a tapering effect on price growth, which again, is similar to what we’re seeing in the rest of the market. But as real estate professionals, we know full well that all housing is local and some markets are performing far better than others.
For example, luxury markets in Maui, Northern California, Colorado, and Sarasota, Florida, are all experiencing substantial price growth, while there are noticeable slowdowns in many parts of New York and New Jersey. Even Queens and Jersey City, which have continued to benefit from high demand, have seen price growth stall recently, indicating that those markets could be losing some steam.
Why the slowdown?
The slowing of luxury sales in certain areas around the country piqued my interest, so I decided to explore why this is happening. The first thing I noticed is that cities with high property taxes are fairly prevalent on the list of slowing markets; this includes cities like Boston, Austin, New York City, and Chicago. It is likely that the federal tax changes limiting the deductibility of property taxes are the culprit for such slowdowns in these areas.
Something else that has undoubtedly impacted luxury home sales in markets, such as New York City and Seattle, is the significant decline in foreign buyers from countries like China and Canada. According to the National Association of Realtors, the number of purchases by international buyers fell by 21 percent between 2017 and 2018, amounting to a drop of $32 billion – the largest decline on record. Foreign buyers spent $121 billion on 266,754 properties, making up 8 percent of the buyers of existing (previously lived in) homes.
My research tells me that foreign home buyers are pulling back amid political uncertainty in the U.S. Ongoing concerns about a potential trade war, combined with rhetoric against foreigners, have done their part to dampen some of the enthusiasm to invest in U.S. housing. Also playing a role in this slowdown is the Chinese Central Government which has started placing tighter controls on the ability to spend money outside of mainland China. And finally, rising home prices and a strong U.S. dollar are likely two other key factors behind the tumbling interest in luxury real estate from overseas buyers.
So how do I see the luxury market performing in 2019?
Luxury real estate sales in markets like Boston, Clearwater, Austin, and Alexandria, Virginia will continue to slow down for the reasons stated earlier, but in other parts of the country, home buyers will provide the demand needed to keep the market plugging along at a healthy pace.
The changes affecting mortgage interest deductions and property taxes will also continue to impact the luxury market in certain areas, but this will, to a degree, be offset by other tax changes that favor high-income households and increase their disposable income. Something else that will help keep the luxury real estate market afloat in the coming year is jumbo mortgage interest rates which remain remarkably competitive compared to historic standards.
On a whole, high-end real estate sales have been strong over the past few years. While I am predicting somewhat of a slowdown next year given the headwinds discussed earlier, 2019 will be remembered as a year where balance started to return to the luxury housing market.
Mr. Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.