If you’ve read the business section of the newspaper lately, you may have read stories on Colorado’s housing market and how it’s absolutely booming, particularly along the Front Range. Denver, in fact, is the hottest real estate market in the country right now, beating out places like New York City and San Francisco. All across the country, people have ‘been on the fence’ about buying homes, yet the Front Range is now seeing a lot of these “fence sitters” finally take the jump. On this week’s show, we discussed why people are deciding to buy and what this means for the local and national markets.
Places like Denver and Colorado Springs have already recovered from the steep housing declines our markets took in the aftermath of the 2008 housing collapse. Meanwhile, some places, like Las Vegas and Illinois, are still far behind their 2008 highs. This is because there are both micro and macro reasons that people are on the fence about buying homes. The macro reason is simple demographics; as I’ve explained before, the Baby Boomers are retiring and selling their homes, and there won’t be a generation large enough to soak up this excess supply until the Millennials come of age, which is only starting to happen now. The micro reason is that economies on the city- and state-level vary wildly; some economies are still lagging behind while others, like Denver, are positively booming and attracting young talent that is driving their housing market.
As an example, a professional acquaintance of mine told me he was selling his +$1 million home, and I expressed skepticism that he’ll be able to sell this property very easily. As Bill McAfee of Empire Title has been mentioning for over a year on this show, demand for high-end properties ($600,000 and over) has been tepid and is the one housing segment where values have either plateaued or actually declined. There simply isn’t a sizeable population of Generation Xers looking to buy all the housing Baby Boomers are selling as they downsize. Perhaps in Denver, where rising wages allow younger people to buy more expensive homes, this isn’t an issue; but in the Springs and elsewhere these demographic forces are depressing property values on the high end.
Fortunately, Colorado Springs’ large presence of military and non-profit organizations has brought large numbers of young buyers here to drive demand in the lower- and middle-tiers. Our local economy is robust enough to generate demand and nurture a robust and thriving housing market. Although demographics are extremely important on the national level, they aren’t able to predict what will happen at the local level. Nationally we’re still waiting on the Millennials to come of age in meaningful numbers, but all along the Front Range we are drawing the rest of the country’s supply of Millennials into our economy and getting a head-start on everyone else.
If you’ve been on the fence about buying your first home or upgrading to a new one, now is the time to start thinking about making the jump. Our economy and housing market have improved drastically over the last few years while interest rates are still historically low. Many individuals will find that the conditions that kept them on the fence for the past few years no longer apply, and it may finally be the time to jump.