2018 In the Books My Prediction for 2019 Follows

In Sunday’s Denver Post there was an interesting article titled: Is metro Denver’s hot streak in home prices at risk? Analysts disagree concerning the forecast for the Denver housing market and how those asked to opine are not in agreement; what a surprise.

While Denver continues to be placed in the same tier concerning price appreciation on a percentage basis as Seattle and San Francisco I am not sure these markets are truly comparable. Both those cities are on a coast thus you have a geography limitation (of note the most expensive cities in terms of cost of living in the United States are all along coastlines i.e. historic transportation/commerce hubs).  The reality is concerning those cities and others along coastlines is a simplistic supply and demand correlation concerning buildable land.

Yet cities such as Phoenix and Las Vegas are mentioned as a caution of past markets concerning exponential gains in values only to come crashing down. While in geographical terms Denver is more akin to those cities; again the comparison is flawed. Those cities experienced wide-spread speculation within their respective real estate markets and while similar population numbers the cities vastly greatly concerning socio-economic and business diversity demographics.

What I find interesting is Denver is rarely placed in the same category of cities in the Midwest including Minneapolis, St Louis, Kansas City and others.  These are cities which share geographic similarities, similar population numbers and other demographic traits. My gut is those cities are not as sexy concerning the attraction of readership numbers. Also never to forget our 300 days of sunshine!

So what do I see for Denver and the Metro area for 2019 (and yes I will be looking back to this blog and filling the TBD in December 2019):

Overall Slowing of Sales: My gut is we will see a continued slowdown in sales due to various factors including:

  • Continued mortgage interest rate pressures i.e. inverse to housing prices
  • A mild national recession
  • Slowing in-migration and increasing out-migration concerning the Metro Area
  • Stagnant job growth
  • Potential corporate relocations to locales with more affordable housing and larger  pool of labor

Yes I am well aware of VF Corporation relocating to Denver yet I am also aware of Chipotle relocating to the West Coast (more due to CEO desires versus labor and cost of living criteria).

While I do not see the Denver metro market cratering as mentioned I envision slowing concerning sales activity, a subsequent increase in inventory and by laws of economics stagnant to downward pricing to follow.

We have witnessed this already in the upper-tier of the market i.e. $500K and above and I believe we will see this trend trickle down to all price tiers and neighborhoods. On average I would suggest the overall 2019 across-the-board statistics at the end of the year will see prices 5% below 2018 and even more in real inflation adjusted Dollars.

In specific tiers of the market I believe closed prices will come down 10% of more based on a PSF basis especially in neighborhoods which witnessed exaggerated price appreciation since The Great Recession including areas where supply may be exceeding demand.

From a back of the napkin calculations and statistics gathered from REColorado:

Neighborhood               # Sold   2018 PSF     2019 Forecast  2019 Actual

  • Country Club*:      73         $535                $495   (-$40)             TBD
  • Cherry Creek**:    202       $425                $395   ($-30)             TBD
  • Wash Park***:       88         $609                $540   (-$69)             TBD
  • Highlands****:      386       $440                $405   (-35)               TBD
  • Cherry Hills*****: 87         $452                $410  (-$42)              TBD

Avg. PSF is based on Above Grade/Finished

  • *Country Club: 1st Ave. to 8th Ave., Downing St. to University Blvd.
  • **Cherry Creek: 1st Ave./Alameda Ave. to 6th Ave., University Blvd. to CO. Blvd.
  • ***Wash Park: Louisiana Ave. to Alameda Ave., Broadway to University Blvd.
  • ****Highlands: 28th Ave. to 38th Ave., Perry St. to I-25
  • *****Cherry Hills: Municipal Boundaries of Cherry Hills Village

I will be re-posting this blog on December 30, 2019 with the TBD to be replaced with actual numbers for a comparison.

Thank you for your readership and support and I forward to continuing to blog into 2019 and beyond. Have a Happy, Healthy and Prosperous 2019.

 

 

 

 

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