So what can we expect in 2016 concerning the Denver Housing Market

Over the weekend the Denver Post ran an insightful article: Metro Denver Housing Remains Constrained and Combustable. While it is no secret the Denver Metro area has experienced a significant uptick since the great recession, there are questions about sustainability, a housing bubble and other concerns. As a broker in the business for a few decades a few personal thoughts:

Potential Bubble: While I truly believe prices at the upper-end of the market i.e. $600K and above are not sustainable; the concern of a bubble is probably overblown. Yes Denver did experience a bubble in the mid 2000’s HOWEVER leading standards were lax, buyers assumed 10%+ annual gains were the norm and housing prices vastly exceeded average incomes. While there are still issues in the market; stricter lending requirements and verifications, appraisal oversight and other safeguards I believe will prevent another bubble in the immediate future.

Housing Type: One concern is the development of apartments and multi-family housing due in part to land being more expensive and thus the need for the end product to justify the cost of the dirt. Three issues: 1) Metro Denver has historically been a region dominated by single family homes as style of choice, 2) the younger buyers of condos will eventually seek out single-family homes once they start families and 3) the glut of deluxe and luxury rentals developed and proposed does not match the demand for more affordable housing throughout the metro area. During a showing last week one of the clients mentioned a standard 50′ x 125′ (6,250 SF) lot in The Highlands is asking $2M. A similar lot in Cherry Creek North is running $1M. While the Highlands is hot and in-demand and may facilitate higher density one must start to question is exuberance trumping location, location, location?

Is Income Sustainable: With the average house in Metro Denver selling in excess of $300K. Most lenders would require an income of approximately $70,000 – $75,000. The average income in Metro Denver for 2014 was $69,000, thus we are bumping up against some thresholds. Assuming income growth matches housing price increases we should be OK however this seldom happens.

Interest Rates: Even with the recent turmoil concerning equity markets worldwide, once growth begins in earnest interest rates will rise. At present we are still enjoying historically low interest rates HOWEVER this too is not sustainable. The low worldwide interest rates were in direct response to the worldwide great recession. When growth happens if not kept in check inflation can be an issue which generally leads to an increase in interest rates as the Fed uses Federal Fund rates to control growth. Rising interest rates usually lead to a reduction in housing prices as the cost of lending is increased. Thus, if I were a buyer in today’s market, capture the 30 yr fixed rate and sit back and know your payments are fixed. Of note, when I purchased a row house in Cherry Creek North in 1989, lending requirements including 20% down as it was an attached house i.e. perceived risk and the interest rate on my 15 yr. mortgage was close to 10%.

Prophecy by So Called Experts: My concern is the market prognosticators are advising 2016 is Denver’s Year. These same pundits advised the same moniker for Phoenix, Las Vegas and other hot markets of years past. Thus that alone gives me some concern.

What am I telling clients? If you are buying for the longer haul i.e. minimum 3-5 years, go for it. If you may be moving sooner, don’t expect the continued 10%+ annual valuation increase as if you must sell within 3 years of purchasing it may be wise to consider renting as equity appreciation is far from guaranteed and when coupled with the fees related to selling one may incur a loss.

 

Cherry Creek North Real Estate Recap for 2015

It was another banner year for the Cherry Creek North residential neighborhood (generally considered from 1st to 6th Avenues, University to Colorado Boulevards).

Cherry Creek North: 1st Avenue to 86h Avenue, University Blvd to CO. Blvd:

Average Home Sold: 3 Bedrooms/3 Bathrooms

Average Size: 2,009 SF Above Grade / 2,642 SF Total

Average Days on Market: 62

Average Price: $987,303

As a neighborhood resident since 1989 I am in awe at the numbers.  As a broker I and others were shocked when Paul Kobey developed a row of luxury attached homes called the Georgetown on the 400 block of Columbine Street. At the time of development the asking price of $400,000 was considered the top of the market and unattainable. In today’s market, the lowest priced listing in the neighborhood is in the $450K range, a small tudor abutting Colorado Boulevard.

Will the success last? If I were truly clairvoyant I would not be composing this blog and would be residing on

the French side of St. Martin, however I would be somewhat concerned. While the average sales price is just shy of $1M; of concern is the number of days on the market.  While conventional wisdom does advise the higher the price the longer on the market, coupled with increased inventory available and higher interest rates the pinnacle may have been reached.

Of concern from a brokers perspective is the development of the luxury rentals and condos being developed in the neighborhood. I am just not sure where the demand for such inventory is coming from. While I have represented mountain residents and others desiring a pied-a-terre in Cherry Creek, this market is truly finite. It is not uncommon to look up at the buildings and see few if any lights on.

More positive is the lack of spec houses i.e. those built on speculation. With standard 50′ x 125′ lots pushing the $1M mark, development on those lots is now more commonly bespoke by a buyer versus speculation. While there are a few spec developments, still more common south of 1st Avenue where land is generally less costly.

If I were in the market as a potential seller at present I would place on the market yet price attractively to cut through the clutter on the market and stand out as a value proposition. As a buyer, unless planning to stay a minimum 3-5 years I would seriously consider advising to rent or hold off a few months and keep an eye on inventory and price reductions. Granted I am a conservative broker yet I have also been through three business cycles during my years as a broker and while I am not concerned about a potential crash of value; between forecast increases of mortgage interest rates, the equities market moving sideways the economic issues in China, many pundits are cautious. As one long time client who is a voracious buyer commented to me “I am now a seller”.

 

Country Club Real Estate Recap for 2015

Greetings from Cherry Creek. As you are probably aware 2015 was a banner year for real estate in Central Denver. From the depths of the Great Recession we witnessed a true market reversal. The Country Club neighborhood continued to witness strong growth concerning prices. Of note, the average sales price was just under $1M, a significant amount within Metropolitan Denver. Below is a recap of 2015 real estate activity from our Multilist Service:

Country Club: 1st Avenue to 8th Avenue, Downing Street to York/University Blvd:

Average Home Sold: 4 Bedrooms/3 Bathrooms)

Average Size: 2,373 SF Above Grade / 3,417 SF Total

Average Days on Market: 41

Average Price: $983,520

Of interest, Country Club is truly a collection of smaller unique sub-neighborhoods. In general homes south of 3rd Avenue and east of Gilpin Street commanded the highest prices due to lot and home size coupled with location.

The homes sold in the 400 and 500 blocks from Downing Street to Gilpin St enjoyed serious equity appreciation with a few sales generating 30%+ appreciation from 2-3 years prior sans renovation or updating.

North Country Club considered the neighborhood between 6th and 8th Avenues from Downing to York St. continued to prove popular providing buyers with larger homes and lots when compared to their south of 6th neighbor’s and generating increasing values. Of note from Williams St east includes the 7th Avenue Historic District. In general Historic Districts command higher prices and resale values.

 

Congress Park Real Estate Recap for 2015

2015 was a banner year for real estate in Central Denver. From the depths of the Great Recession we witnessed a true market reversal. The neighborhood we specialize in i.e. Congress Park enjoyed continued strong growth. Below is a recap of 2015 real estate activity from our Multilist Service:

Congress Park: 6th Avenue to 13th Avenue, York Street to Colorado Blvd:

Average Home Sold: 3 Bedrooms/2 Bathrooms

Average Size: 1,520 SF Above Grade / 2,269 SF Total

Average Days on Market: 20

Average Price: $561,306