How Long Will Home Prices Continue to Rise?

Alaris Properties

I have been researching the current trends in Colorado real estate and specifically in our foothill region. As inventory stays low and prices continue to rise, the question becomes: how long can we anticipate this trend to last?

Certainly, that is the million-dollar question and likely requires a crystal ball to answer it completely. However, there are some indicators that we can examine and I also found some interesting statistics that I would like to share with you as you ponder this question.

Interestingly, Colorado and South Carolina lead the nation in real estate price increases. In fact, if we continue this trend, home prices could rise as much as 21% in 2015. This is the hottest home-price appreciation in over nine years. The combination of low interest rates, low inventory, investor and consumer confidence, along with strong employment numbers, have led to this increase.

In March, the median price of a home in Denver was $344,580. In Evergreen, the median price is over $500,000; Conifer is over $400,000; and, Golden is approaching $500,000. Needless to say, these are some very impressive numbers.

Moreover, as we have been reporting, metro Denver rents are skyrocketing. This is a very important metric. Price-to-rent ratios are a strong indicator because they can tell you whether the housing market is overvalued. During the housing bubble, this metric was ignored. During the bubble, rent prices remained constant when home prices were trending up dramatically. Interestingly, rent prices are not rising as fast in other parts of the country. Some say this is an indicator that the real estate market may be slowing nationally. We will continue to monitor this carefully.

Another important factor is our demographics. As predicted, baby boomers are retiring in large numbers and the millennials are hitting the workforce. These two demographics affect the price of real estate. Baby boomers are downsizing and many millennials are choosing to continue to live with their parents. Frankly, many millennials cannot afford the high cost of rent. One report showed millennials who are renting are paying as much as 22.6% of their gross income toward rent. Historically, homeownership rates have been between 64 and 65%. We remain just under 65% nationally, with no expectation of seeing this change.

Two other national factors that measure housing cost trends are the ratio of housing wealth to the Gross Domestic Product, and how many buyers pay cash for real estate. Nationally, those figures are indicating a potential slow down in the cost of real estate. In Colorado, low inventory, low interest rates and very strong job growth are indicating continued real estate price increases.

For Colorado, the old “supply and demand” forces are causing the price of real estate to rise. My crystal ball tells me that we will see this trend continue for the foreseeable future. I’m not prepared to forecast beyond 2015; however, based on all that I have read, we can expect real estate inventory to stay low and prices to rise for the rest of this year.

If you are contemplating putting your home on the market, many buyers would be grateful. As of this writing, there are only 162 active listings in Evergreen, 61 in Conifer, and 94 in Golden. We are off by more than half of historic active listings for this time of year.

Nonetheless, at Alaris Properties, LLC, we are closing transactions left and right. If you are in the market to buy or sell, stop by our new offices at 25958 Genesee Trail Road in the Genesee Town Center. We would be honored to work with you. Call us at 303-526-7400 or check out our website at www.AlarisProperties.com.

Also, while you’re here you can pick up some amazing fudge from the Genesee Country Store, a cup of coffee at the Buffalo Moon, a slice of pizza at Guidos, have lunch or dinner at the Hideway, have a massage at Zoe’s, workout at the fitness center, get a hair cut at the salon, or drop off your dry cleaning. What I’m really telling you is that the Genesee Town Center has it “going on”. Come check it out for yourself.


 
Categories:

 
Tags:

 

Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.

One Response to “How Long Will Home Prices Continue to Rise?”

  1. Peter says:

    Best article that I have read so far that makes good sense. We are experiencing a feeding frenzy in the Denver and suburban housing market. It stands to reason as Colorado is the best state to live in.

Leave a Reply