Real Estate Outlook For 2017
In 2017, the housing market is expected to see gains in home prices though likely at a more moderate pace than previous years. In 2016, fueled by low inventory, low interest rates, and high demand, median home prices in the Denver metro area increased 11%. This year, many industry experts expect appreciation between 5-9%. This would certainly be more sustainable long term and healthier overall than double-digit gains. But don’t rule double-digit gains out completely; low inventory paired with high demand, healthy job growth, and low unemployment as well as a variety of factors will decide what kind of year 2017 shapes up to be.
Factors To Watch In 2017:
According to the Colorado Division of Local Government, millennials now account for 25% of Denver’s population making them the largest demographic in the Denver area. Millennials will account for a large percentage of first time home buyers who will make the transition from renting to owning. As millennials get older and their incomes grow, especially in the 28-31 age group, the amount of buyers entering the market will increase adding to an already high demand.
2. Job Growth:
Denver added nearly 51,000 new jobs each year from 2014-2016 in a wide variety of industries including aviation, IT services, beverage production, renewable energy, and aerospace. Through the third quarter in 2016, Colorado was the 9th fastest state for job growth in 2016 (2.8%) while jobs in metro Denver grew 3.1% with Ft. Collins leading out at 3.5%.
3. Interest Rates:
Currently, rates for a 30 year FRM are approaching 4.3%; almost a point from 3.4% rates that were available just four months ago. Economists expect the Fed to hike rates 2-3 times in 2017 with the first rate hike coming most likely in March or April. Rising rates will gradually price some buyers out of an already hot market. If rates reach 5%, it could begin to slow demand somewhat and home prices could soften.
Inventory is still very low at 7 weeks, and although building permits are up 16% in the first part of the year, new builds have been unable to keep pace with demand. Denver remains a destination city and net migration projections indicate we will likely add another 50,000 people in 2017.
If you have any questions about the market or about buying or selling a home, feel free to email me at email@example.com.
Sources: Colorado Division of Local Government, Denver Metro Association of Realtors, U.S. Bureau of Labor Statistics, Development Research Partners.