The Denver housing market appears on track to pace the national market over the remainder of 2022. If for nothing else, real estate in Denver has outperformed most markets across the country for the better part of a decade, and the Mile-High City appears to be less susceptible to volatile shifts in the market brought about by the Coronavirus. The city was already receiving support from several positive indicators before issuing “shelter-in-place” orders roughly two years ago, and positive momentum is mounting in 2022. Denver’s unemployment rate, in particular, fared better than most markets over the course of the pandemic, which should facilitate more housing activity sooner rather than later.
All things considered, the Denver housing market is positioned to return to “normal” faster than many of its counterparts, which begs the question: Is Denver a good place to invest? While the answer is ultimately up to the investor, this city is currently brimming with potential for those who know where to look. The Denver real estate investing community should be able to capitalize on today’s market as long as they listen to what it’s saying.
Denver Real Estate Market 2022 Overview
Median Home Value: $599,742
Median List Price: $629,290
1-Year Appreciation Rate: +19.1%
Median Home Value (1-Year Forecast): +21.5%
Weeks Of Supply: 3.7 (-1.1 year over year)
New Listings: 887 (+14.6% year over year)
Active Listings: 2,392 (-35.9% year over year)
Homes Sold: 675 (-14.9% year over year)
Median Days On Market: 6 (-0.7 year over year)
Median Rent: $1,693 (+14.9% year over year)
Price-To-Rent Ratio: 29.52
Unemployment Rate: 4.2% (latest estimate by the Bureau Of Labor Statistics)
Population: 715,522 (latest estimate by the U.S. Census Bureau)
Median Household Income: $68,592 (latest estimate by the U.S. Census Bureau)
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Denver Housing Market Trends 2022
Today’s Denver housing market trends are largely the result of the ongoing pandemic. In particular, everyone actively participating in the local real estate sector has had to adapt to a new landscape. Most notably, however, home prices have appreciated at a much faster rate than anyone could have anticipated. Over the last year, the median home value in Denver has risen upwards of 19.1%, coming in just below the national average.
Price increases are directly correlated to new indicators created during the pandemic. More competition onset by lower borrowing costs and government stimuli has had to compete over fewer listings for far too long. The drastic difference in supply and demand has enabled more homeowners to increase asking prices accordingly. Perhaps even more importantly, prices will continue to rise as long as demand greatly outweighs supply. Forecasts are already calling for an even faster rate of home price appreciation in Denver over the course of 2022.
Due to higher prices and fewer listings, more residents have turned to the rental market. The added attention has increased rental asking prices, albeit slightly less than their home price counterparts. The migration of buyers from the housing market to the rental market increased demand for leased units, and should continue to do so for the foreseeable future. Similar Denver housing market trends should continue well into 2022, but rental rates may increase more than home prices because of the added demand.
Opportunistic Denver real estate investors should emphasize long-term rental property acquisitions. The latest increase in demand and rent should offset higher acquisition costs and enable years of positive cash flow.
Denver Foreclosure Statistics 2022
According to Attom Data Solutions’ January 2022 U.S. Foreclosure Market Report, “there were a total of 23,204 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — up 29 percent from a month ago and 139 percent from a year ago.” The January numbers represent the highest foreclosure rate across the country since the beginning of the pandemic.
“The increased level of foreclosure activity in January wasn’t a surprise,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM company. “Foreclosures typically slow down during the holidays in November and December and pick back up after the first of the year. This year, the increases were probably a little more dramatic than usual since foreclosure restrictions placed on mortgage servicers by the CFPB expired at the end of December.”
There’s no doubt about it: investors should expect to see an influx in foreclosures over the remainder of this year. However, the Denver real estate market may be slightly more insulated from an increase in distressed homeowners. At the very least, Denver’s unemployment rate has fared better than most other cities across the country. With more people employed and the economy slowly improving, there’s a good chance Denver could avoid a worst-case scenario. While foreclosures will increase, they may do so at a slower pace than many of their counterparts.
Denver Median Home Prices In 2022
The median home value in Denver is $599,742. Nonetheless, today’s home value doesn’t tell the whole story. Slightly more than a decade ago (June 2011), the median home value in the Denver real estate market dropped as low as $232,000. Thanks largely to an expanding economy, increasing sentiment, and—ironically—a lack of available inventory, real estate in Denver has ridden a wave of positive indicators to get to where it is today, to the tune of a 158.5% increase. To put things into perspective, the median home value in the United States increased 99.8% over the same period of time, and is now approximately $325,677, according to Zillow.
Despite historical appreciation rates, home prices in Denver are expected to increase as we get deeper into 2022. The local market’s meager 3.7 weeks of supply suggest competition is rampant. In fact, the Denver real estate market is leaning so heavily in favor of sellers that prices are expected to increase even more than last year. The latest forecasts are calling for home values to increase as much as 21.5% over the next 12 months; there simply aren’t enough homes to satiate demand, and owners can increase prices as they see fit. As long as interest rates remain attractive and existing inventory is tight, prices will increase.
The latest rate of appreciation has investors asking one question: Is Denver real estate overvalued? The answer isn’t so simple. While prices are higher than ever, sentiment, demand, and supply all suggest prices will increase by as much as double digits. Therefore, there still appears to be room for investors to benefit from appreciation.
Denver Real Estate Market Forecast 2022-2023
Denver has followed a similar trajectory as the national housing market—homes have increased in the wake of lacking inventory and increasing demand. However, in light of the Coronavirus, markets are starting to get a little easier to read. While it is too early to tell exactly what real estate in Denver will look moving forward, it is possible to forecast what is likely to happen.
Here is a look at a Denver real estate market forecast which is most likely going to come true:
Prices Will Increase: The median home value in Denver has already increased 19.1% over the last year. However, despite the rapid rate of appreciation, prices are expected to inch higher. With a mere 3.7 weeks of available inventory, demand still greatly outweighs supply. The imbalance of supply and demand could push home prices up another 21.5% over the next 12 months.
Rents Will Increase: Similar to their home price counterparts, rental rates increase dramatically in one year’s time, up 14.9% year over year. That said, even more buyers are expected to become renters in 2022 as inventory remains tight. The added attention should drive up rental rates even faster than last year, perhaps somewhere in the neighborhood of 16.0%.
Interest Rates Will Rise: The Fed has already announced its intentions of increasing interest rates to combat inflation over the course of 2022. Now around 3.45%, rates are expected to rise at least several more times. The exact amount isn’t yet known, but it is safe to assume higher rates will increase the cost of homeownership in the Denver housing market sooner rather than later. The mere threat of rising costs will also increase demand, further boosting home values.
Should You Invest In The Denver Housing Market?
The Mile-High City has been at the forefront of the national recovery for a decade, which has many people asking the same question: Is it a good time to buy a house in Denver? The answer is inherently tied to each investor and their particular situation. Still, the fact remains: today may be a great time for real estate entrepreneurs to consider building a long-term, passive-income portfolio. Otherwise known as a buy-and-hold exit strategy, starting a rental portfolio is perhaps more attractive in a post-pandemic marketplace than before the impact of COVID-19 on the real estate market. In particular, the following indicators are tilting the scales heavily in favor of passive income investors:
Interest rates on traditional loans are historically low
Years of cash flow can easily justify today’s higher acquisition costs
The price-to-rent ratio suggests high home prices will increase rental demand
For years, rehabbing was the most common investment strategy Denver real estate investors used. However, the market has shifted, and home prices suggest a longer investment horizon is more viable.
Long-term investors are awarded the ability to navigate today’s higher prices with lower interest rates. As of January, the average rate on a 30-year fixed-rate loan was 3.45%, according to Freddie Mac. While interest rates are up slightly year-to-date, it’s important to remember that they are still historically low. As a result, the cost basis for real estate in Denver is lower, making homes more affordable due to recent appreciation.
Investors who take advantage of today’s mortgage rates could easily subtract thousands of dollars from the overall cost of their purchase. More importantly, those who use today’s interest rates to acquire a rental property could very easily increase monthly cash flow from properties placed in operation.
Whereas rehabbers and flippers need to acquire homes below market value to pad profit margins, rental property investors can stand to acquire homes at today’s high prices to pay their mortgages down with other people’s money each month. The cash flow can help offset the higher acquisition costs in as little as a few years while building equity in a physical asset.
Denver real estate investors should take solace in the city’s 29.52 price-to-rent ratio, as it is currently much more affordable to rent than own. As a result, vacancies will be easier to avoid. Not only that, but listings are harder to come by in today’s market, too. The unique combination of affordability and a lack of listings suggest rental property owners will see plenty of demand for the foreseeable future, at least until more homes are constructed.
The real estate investing community is lucky to have several viable exit strategies at its disposal. Still, none appear more attractive than building a proper rental property portfolio at the moment. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.
The Denver housing market was at the forefront of the national recovery over the last decade, and the Mile-High City appears poised to continue leading the pack. Most notably, real estate in Denver is propped up by a strong economy, one that didn’t see its unemployment rate increase as much as the national average. For whatever reason, Denver appears to be slightly insulated from the pandemic, which bodes well for the city moving forward. In fact, look for the Denver housing market to be one of the first to come out of the “shelter-in-place” orders with steady momentum.
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