The Associated Press Buyers are flooding the metro Denver real estate market now that in-person showings have resumed, but the inventory is low. Homes sales
When will Denver’s real estate bubble burst?
Recognizing a housing bubble and when it will pop, despite plenty of available data, is still an opinion that varies from person to person. Here are some facts and opinions that are current as of the date this is written:
1. Denver housing prices are appreciating in value at some of the highest rates in the nation. They have not only far-exceeded bubble prices of 2007 but continue to climb. The S&A Case-Shiller Index helps us see Denver prices are rising very fast compared to most of the nation:
2. Much of the price rise is still based on lack of available inventory. There is simply not enough supply to keep up with demand, especially in middle class / working class price levels. A balanced market is often considered as having six months available inventory, whereas the Denver area is closer to just two months. This creates frequent bidding wars, which drive prices higher.
3. Rising interest rates will push out the bottom tier of available buyers. If rates rise a full 1% (something not likely to happen overnight), this pushes up the price by about $322 per $100,000 financed on a 30 year loan. This could play a big role in slowing the pace of home price increases.
4. There is also a short supply of available rental properties, which push renters toward buying. Zillow notes that rental rates in the area have risen twice as fast as wages (nationally). The uncertainty fuels the fire by actually pushing new potential buyers into the market and creating additional competition for limited inventory:
Conclusion: while prices and eventual rising rates are scary in a hot real estate market, the lack of inventory reduces immediate fear of a housing bubble pop. In my humble opinion, I would expect the housing market to cool off as microeconomic indicators tell us housing is reaching an unsustainable level but we do not appear to be in line for a collapse ala 2007.
Note: I am not in the real estate industry but am an occasional buyer that is always hunting for a good real estate deal. These opinions are purely my own based on information available at the time of this posting. Best wishes in your real estate ventures.