What is Different in 2019
Well this year is off to an inauspicious start already in the Financial World, lots of pessimism. See my 2019 predictions from earlier this week. It’s safe to say I’m cautiously neutral. Not pessimistic but not optimistic. I’m hoping for a “soft landing.”
What we are seeing quite simply is the winding down of years of massive stimulus, the winding down of a 10 year Bull market. The Federal Reserve has raised short term interest rates several times in 2018 and had plans to raise the federal funds rate further in 2019 but now many are calling for a PAUSE.
With artificially low rates, excessive borrowing, risk taking, speculation, and debt can get out of control and it can distort and inflate assets such as stocks, bonds, and real estate. At the same time, it penalizes anyone who has deposits by not paying them anything in return, causing them to effectively either lose money through inflation, or seek better (and riskier) returns through the stock and bond markets, or real estate.
By raising rates, albeit very incrementally and very slowly, the fed is trying to slowly deflate asset prices. This is what I would describe as a soft landing, or at least an attempt to engineer a soft(ish) landing.
Denver Real Estate
Little (<5% per annum) to no appreciation for several years is much more acceptable than a 30% drop in prices. I believe this type of soft landing is necessary and a good thing, as prices could potentially moderate, and allow wages to catch up to prices.
As with the stock market, while certain individual stocks and companies will continue to greatly outperform the market, stocks and companies who are good values, certain areas and neighborhoods of Denver are poised to perform better than others. I believe active, skilled managers of money will become more valuable moving forward. Simply buying an index fund, which worked just fine during the boom times, will not perform the way a knowledgeable advisor will be able to.
Likewise in Real Estate, there are far too many real estate agents, glorified door-openers, too many cheerleaders (Ra-Ra it’s a great time to buy!! Prices always go up!! Buying is cheaper than Renting!!) You know the type.
Active, skilled, knowledgeable, experienced, is going to be critically important moving forward.
What are your thoughts on the Denver Real Estate Market? Up, Down, Flat? We love talking Real Estate. Drop us a line or leave a comment below