Before the housing bubble burst in 2008, Denver, like many cities, was in the middle of a real estate boom. Home construction was extremely lucrative and houses were selling like hotcakes. However, like many American cities, Denver’s real estate market took a major hit in the recession as home prices tanked and construction slowed. Thankfully, industry experts believe the market is showing signs of improvement, as home prices rise. According NAR chief economist Lawrence Yun “Pending sales showed solid gains last month, driven by a steadily improving labor market, mortgage rates hovering around 4 percent, and the likelihood of more renters looking to hedge against increasing rents…these factors bode well for the prospect of an uptick in sales in the coming months. However, the underlying obstacle – especially for first-time buyers – continues to be the depressed level of homes available for sale.”
Yun’s announcement was corroborated Tuesday by the U.S. National Home Price Index, which released a report illustrating a five month decline. However, the index also reported the pricing increase seen by 9 U.S. cities. According to the report, Denver and Miami saw the largest annual appreciation, increasing by 8.4% and 8.3%. Yun adds “Several markets remain highly-competitive due to supply pressures, and Realtors are reporting severe shortages of move-in ready and available properties in lower price ranges. The return of first-time buyers this year will depend on how quickly inventory shows up in the market.”
While the majority of economists would agree this growth is a good sign, the speed of the change in the market is creating a housing crunch. No state has felt this crunch more than Colorado. While Colorado is recovering from the recession quite quickly, the state’s population has continued to grow faster than the national average.
As an economist for the University of Colorado – Leeds School of Business, Richard Woobekind made this statement to KNUC radio “The growth in the state economy being amongst the top five the last three years, continues to inspire a lot of migration into the state, leading to population growth.”
This population growth has affected communities from Ft. Collins to Denver…decreasing the amount of available housing and causing prices to soar, thus squeezing the wallets of renters and buyers alike.
With rental vacancy rates at a 21 year low, the National Association of Realtors expects rents to continue to soar. Even for those who are in the market to buy, the availability of mid-range homes for sale is extremely limited. Recently, RE/MAX agent Anthony Real told Bloomberg Business there is simply not enough inventory under $300,000 on the market today to meet demand. Real was quoted as saying “If we doubled our inventory in that range tomorrow, it would be gone tomorrow.”
Unfortunately for Colorado residents, this means they are in for a battle as competition for homes will remain stiff until construction can catch up to the demand.
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