Photo by George Morina
The wild pandemic housing market had ended as 2022 concluded with a smirk due to a combination of high home prices and interest rates. Bankers and real estate firms around Denver, CO have different thoughts on how much the housing market will rise or fall as high-interest rates have stopped a two-year home-buying boom.
In Colorado, home sales are declining, and home price growth has slowed down, but prices have not returned to their pre-pandemic levels. However, the good news for those interested in the Colorado housing market is that property prices are going strong.
Home prices have risen in most areas of the state over the past two years due to the spike in demand for housing, and Denver is no exception. To learn more, let us explore where the Denver real estate market is heading in 2023!
What Is Going to Happen in Denver's Housing Market This 2023?
The market stats for the Denver real estate market in December 2022 indicate that the city’s housing market is no longer in flux. According to the Denver Metro Housing Market (DMAR), the housing market in Denver has become more balanced. Homes stay on the market for extended periods, and home values are up nearly 1.8% from last year.
Local predictions either expect the Denver area market to grow slower than most cities if it grows at all, or 2023 will bring more balance to the metro Denver housing market. It is believed that property values in Sun Belt cities with skyrocketing home purchases during the pandemic, like Denver, are likely to see home values come back down from inflated peaks.
Here’s the summary of what experts are saying about the Denver real estate forecast:
The Denver Real Estate Market Will Stabilize
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Stability is the most significant prediction for Denver’s market in 2023. The Denver area can expect a slower demand, fewer new listings, and lower inventory during Q1, and Q2 will see the transition to lower rates, more demand, and more new listings.
In Q3 and Q4, Denver will experience a return to average fall trends as buyers seize the opportunity offered by newly listed properties.
DMAR also forecasts buyers and sellers might expect difficulties throughout the first half of 2023 as the economy recovers, and housing should stabilize in the second half of economic condition heights.
Home Prices Will Climb Slowly
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Currently, there is no indication whether home prices in Denver will fall or climb. The Denver-Aurora-Lakewood metro’s home prices are expected to rise more slowly. Some local realtors say that prices will decline, but less than expected, and prices will drop 4% to 6% and are expected to make a comeback by 2024 after a bad first half.
Other market specialists also predict that home prices will keep climbing in 2023. Moreover, firms that think prices will climb in Colorado also believe that the Denver real estate market will rise more slowly than other cities in the country.
Homebuyers Will Have More Leverage
Photo by Mikael Blomkvist
Denver might also anticipate the record-breaking appreciation homeowners have been spoiled with as the market settles. This unparalleled appreciation will feel like a pull-back or a loss in value, but it is normalizing. That said, it will give opportunities to make more logical choices when making home offers.
Pent-Up Demand Relieved by Lower Mortgage Rates
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As forecasters expect a slow rate decline, market experts anticipate increased excitement among buyers and sellers alike. In 2023, homes are likely to be a little more affordable for homebuyers than last spring, and the demand for listings will rise due to the lower rates.
Inventory Will Remain Low
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New construction will be vital in neutralizing Denver’s already tight housing supply. However, with so many homeowners opting to stay put, Denver will see fewer move-up buyers volunteering to sell and leave their low-interest rate mortgages.
Competition Will Heat Up Midyear
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2023 will be an exciting year for buyers and sellers because of the expected increased competition in the market in the middle of 2023 and beyond.
Denver, CO Home Prices Forecast for 2023
City-level predictions of the Denver area’s home prices would rise 4.2% next year, putting it near the bottom fourth of national markets for wage growth. Colorado Springs homes will rise 7%, nearer to the top of national growth.
Moreover, a 1.2% growth in Denver home prices from July 2022 to July 2023 is also anticipated. Greeley, Grand Junction, Colorado Springs, and Pueblo will each see home prices climb higher.
Are There Any Specific Areas of the City That Will See More Growth in 2023?
The ski towns consisting of Steamboat, Breckenridge, Vail, Aspen, Winter Park, and Telluride will come off their highs. As the Denver market softens, Breckenridge and Winter Park might experience a 10% to 15% drop in value.
The selling prices for the destination resorts will be better, with a flat to 5% decrease in cost. If the stock market falls more than expected and the recession is more severe than predicted, the assumptions could significantly change.
Wrap Up
The prices of homes in the Denver area of Colorado have yet to be determined, but buyers and sellers can expect home prices to rise slowly or decrease, but don’t expect a high downward trend. Several factors can affect the price growth in Denver; the inventory fluctuations will indicate the market direction in the city, and interest rates also play a significant factor.
Whether rates stabilize or decrease, note that they remain higher than a year ago. Thus, the decrease in home prices is less than we thought, and this will likely discourage some potential buyers even with more homes on the market.
The home inventory of Denver will also see growth in 2023, but more is needed to accommodate the growing demand.
Needless to say, like other areas of Colorado, buyers and sellers will likely experience difficulties during Q1 and Q2 of 2023 as the economy recovers. Still, average fall trends are expected during mid-year 2023 as competition in the market pent up with buyers seizing the opportunity to purchase newly listed residences.
Are you interested in investing in the Denver real estate market? If you need assistance or have any inquiries about the homes in the city or the 2023 real estate market forecast, feel free to call me anytime at 303-351-2280.
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Frequently Asked Questions:
What changes do you see in the Denver real estate market over the next five years?
Denver’s real estate market will remain robust for the next five years since tight market conditions will likely persist and housing demand will surpass supply.
However, the market may lose momentum if mortgage rates continue to increase, allowing Denver inventory to increase slightly, slowing the home price growth rate, and lowering the likelihood of an overheated housing market.
How will the economy and job market impact the real estate market in Denver?
The state of the economy is essential in determining whether Denver real estate prices will be on the rise or fall. If Denver continues to have a strong economy, many people can buy new homes and enjoy lower mortgage rates. If the inflation rate continues to rise and the job market in the city is down, people have less money to spend on everything from basics like housing.
What do you think are the most promising areas for real estate investment in Denver?
Berkeley, Chaffee Park, Edgewood, Morse Park, and West Colfax are some of the most promising neighborhoods for real estate investment in Denver, CO.
Will home prices continue to rise in Denver over the next five years?
Prices will continue growing when there isn’t enough supply to meet demand. Although home builders point to a scarcity of workforce and rising prices as obstacles, new construction is anticipated to continue growing to somewhat help with the shortfall of supply in Denver.
Homes are also expected to continue to appreciate, even if it is no longer at the breakneck pace of 2021-2022’s 15+% each month.
Are there any potential risks that buyers or sellers should be aware of in the Denver market?
The number one risk to consider in the Denver market is inflation, which results in rising interest rates. As the prices of goods and services rush to catch up with real estate prices, interest rates usually rise as inflation rises.
If that happens, loan qualifications for home buyers will get tighter. Many will only qualify for a lower loan amount. In turn, home prices could dip significantly in some market segments. From a seller’s perspective, there will be fewer interested buyers because they were priced out of the current market. In turn, receiving offers and selling your home will take longer.
What advice would you give to someone who is looking to invest in property in Denver in 2023?
Before investing in Denver, it will be helpful to research the city’s current real estate situation and neighborhoods. Finding a real estate agent who deeply understands Denver’s real estate market would also be better.
When you have found one, explain to them your investment goals to help you find the right property that meets your specific requirements. Moreover, beware of taking on a more significant challenge than you can handle if you’re new to investing in real estate. You must have home improvement skills or know someone good at it to avoid losing money rehabilitating the Denver property.
Do you have any other predictions or insights about the real estate market in Denver in 2023?
The real estate market in Denver is going to get better in 2023. We see 2023 will be a renormalizing year. We can see path form rates hitting their high and coming down, inventory locked up, sales dropped, and demand is still pent up.
News cycles in quarter one will pick up year-over-year comparisons, which will look worse but pay attention to inflation, job loss, and rates. The Fed is moving towards raising the fed rate two more times by 0.25% each. When inflation falls further and job losses restrain wage inflation, interest rates will fall below 6%, and the mood will shift.