WHAT TO EXPECT IN 2019
As we approach the end of the year, it’s a great time to review what the real estate market experienced in 2018 and where we think it will head in the new year. How do we feel about the past year? How do we feel about the future? Here are a few different metrics that I use to evaluate the market and help you understand it better.
As you can see from the graph on page 2, inventory levels are historically low. It took several years for the inventory to get this tight; it will take several years for inventory to build to historically “normal” levels. If inventory continues to rise, and I believe it will continue to slowly drift higher, then it will likely be easier to sell now than in the future.
No one knows exactly what interest rates will do in the future, but my best guess is that they may rise a little in 2019. The Federal REserve is expected to raise short term rates during 2019 as a natural response to the current strength of the economy. However, even if the Fed raises rates, that does not directly affect the 30-year home buyer or seller. Long-term interest rates, affected by the bond market, are unpredictable. That being said, home-buyer interest rates are still held at historically low rates and are unlikely to fall any further.
The Denver economy is very strong right now, and is predicted to carry the momentum into 2019. The state of Colorado is on track to add 65,000 jobs this year (a growth rate of 2.4%), and currently has one of the lowest unemployment rates of any of the states. This is connected to our high net immigration rates, with around 53,000 people being added this year. In 2019, I am expecting the economy to grow about 2.7% and for net immigration to rise again by about 50,000 people. I anticipate the economy to continue to grow, but at a slightly slower pace that we saw this past year.
TAKE ADVANTAGE OF THE CURRENT MARKET
If you are a buyer, it is a better time to buy than any time in the last five years, and here are some reasons why:
1. Fewer buyers competing
2. Sellers are surprised their homes didn’t sell the first weekend, so some sellers are more motivated than usual
3. There are a lot of reports of sellers being much more likely to accept contingent offers, a little less than asking price, and working with buyers on inspection notice finding.
If you are a first-time buyer or investor, this is an excellent opportunity! I am not sure how long this opportunity will last, but I recommend that buyers take action before February, as late January is historically when the spring sales boom begins.
For the past several years, we have had record low housing inventory in Denver. November showed a +28.4% increase in new listings from the previous year, with 8,077 houses listed. Homes in nice condition that are priced correctly are still selling faster than the historical average. However, as demonstrated by the chart below, number of sold listings have decreased by -16.8% from November of last year, with 3,831 homes sold in the metro Denver area. I expect inventory to continue to increase in 2019.
The rental market remains super strong. The vacancy rate for 1-8 unit properties currently claims the lowest vacancy rate at 2.6%. Rents are rising quickly, with the average rent increasing by 3.7% since this time last year. As a result of rising rents, we are seeing some renters deciding that it’s time to buy instead of suffering through additional rent increases and tougher application processes.
The economy is always unpredictable, but we are able to make highly-informed guesses on what may happen based on the past. Overall, I am very optimistic about the real estate market for 2019. If you are curious about the future of your home, please do not hesitate to reach out to me! I am happy to answer any questions you may have.