On Sept. 7, 2017, the Denver Post published an article titled “Metro Denver housing market’s summer slide extends into August,” which would leave the casual reader wondering, will the Denver housing market crash? They point out that the median single-family home price fell 2.4 percent from July to August and that inventory has fallen as well. I received several calls from clients and friends asking what I thought of this. My answer? This is exactly what folks who don’t understand anything about real estate would write in order to get a sexy, above-the-fold headline published. Bad journalism to say the least.
The Denver Post got it wrong and here’s why. They are using irrelevant, short-term, month-over-month data instead of year-over-year data, specifically to mislead their readers into believing the Post has some unique insight into the market that others don’t. The problem is all you have to do is go back a couple of years and see the exact same thing happened in the summers of 2015 and 2016 to understand their error! In 2015 single-family home prices fell 2 percent from July to August. In 2016 single-family home prices fell 3 percent from July to August. Yet both years ended with large price increases as the market continued to climb. There is every reason to believe the same thing will happen again this year. So, for the Post to say that prices went down July to August of this year and suggest the market is finally cooling is just plain unprofessional. The same exact thing happened the past two years and clearly it did not signal a market top.
The Post also reported “the number of single-family homes sold fell 8.7 percent month over month and is down 10.6 percent from a year ago.” What they imply is this is a sign of a weakening market when exactly the opposite is true! The reason the number of homes sold fell is we have so little inventory on the market to choose from. The housing market has remained strong precisely because we have more buyers than sellers, but unfortunately the Post does not understand basic economics. Alas.
So here’s what we think the market looks like. Coming into the fourth quarter of 2017 the state of the metro Denver real estate market remains strong. Prices are up (year over year!), inventory remains low, days on market are at rock bottom and there continues to be much more demand than supply in all but the high-end, luxury market.
Let’s look at our metro Denver housing market for the past 45 years and see how it has developed over time. In the graph you see metro Denver home prices from 1971 to present day. Prices rose from 1971 into the mid ‘80s, at which point they flattened out for several years during a downturn in our economy and record-high interest rates. Then in 1991 they started rising again and continued rising for 15 years. We peaked in 2006 and had a dramatic 25 percent drop in prices through 2009. By 2013 prices got back to their previous 2006 highs and have shown no sign of slowing since.
Every week my clients ask, “will the Denver housing market crash?”, most recently brought on by the Denver Post article. Over and over my response has been that the underlying market fundamentals remain strong and I see only continued gains in the market for the foreseeable future.
So far in 2017 prices have continued to rise, up another 7.8 percent in the past 12 months. If you were to ask me the same question today, “Are we in an overheated market heading for a crash?” my answer would remain the same: Market fundamentals are strong and I’m confident on the near to midterm horizon.