2018 Real Estate Predictions

I’ve been busy this first week of 2018 reading through economic forecasts, Real Estate Forecasts, and really getting deep into it.  

The one thing to bear in mind is most people making forecasts have a vested interest in something or other.  For instance, financial industry workers rarely admit that the stock market is overvalued or may correct.  Realtors rarely say its a bad time to buy.  

I’m appalled at the level of dishonest or just plain simpleminded stuff that is spewed in the media nowadays.  Real, actual reporting is rare.  Most data seems like it is made up on the spot, with not much accountability.  In the real estate world, online estimates have been popular for awhile, and they tend to be way off all the time.  The average Joe takes anything he reads online or on facebook as fact though.  

I am taking the stance of “cautious optimism” because all asset classes are inflated right now, especially in superstar cities like Denver. 

With that being said, here are my predictions for Denver Real Estate this year:

Optimistic predicitons

• Mortgage Interest Rates will end the year around 4.5% for a 30 year fixed conforming.  This will stretch buyers at the bottom even more, but would not be enough to really disrupt the market. 
• Year over Year appreciation will decrease to 6%, still historically high due to lots of newly-built, expensive condo units closing, and the sales prices of new construction homes continues to escalate.  “Same store” home appreciation will be relatively flat.
• More millennials will enter the market as home buyers in increasing numbers due to the simple fact that they are getting older.  The oldest millennials are now in their low to mid 30’s, and while family formation and job growth was delayed more are reaching this stage now.  
• In-Migration to Colorado and especially Denver will slow down considerably.  The cost of living and housing affordability just hasn’t kept pace with wages. 
• We’ll see more neighborhood-level smaller condo projects (30 units or less) get off the ground, projects that can get built for less money, more quickly, and are in A+ locations where demand is the greatest.  Think Cherry Creek, Lohi, Wash Park, etc.
• Lending will have to continue to loosen in an effort to stimulate the market

Caution

• Will this be the year the apartment vacancy surplus becomes a problem for institutional landlords?  How deep is the luxury renter pool in Denver?  
• Rates could rise faster and this would have a very adverse effect on real estate markets.  The Federal Reserve is a real wild-card here.
• We’re due for a market correction, it could happen in 2018
• Gas to between $3-4 a gallon.  This will also have a very adverse effect on the overall real estate market.

One thing is sure: 2018 promises to be interesting.  It goes without saying that if you have something to sell, you’re (still) in a good position.  If you’re buying, make sure its a sound purchase and you’ve done your homework.