Question: Are We in a Real Estate Bubble?

This is the million dollar question “Are we in a Real Estate Bubble?” and I’ve had this question asked a lot of me lately, so I thought I would throw in my two cents worth on the subject.  We have some very strong macro forces at work here; demand in the $400k and less price range far exceeds supply and with next to no help from new home builders, this will be the issue confronting the Denver market for the foreseeable future.  On the flip side, we have a rising rate environment and with affordability becoming an issue for many buyers, we clearly have a strong tug of war going on here.  I attended a class the other day and they were saying it would take new home builders 10-12 years to catch up to the current inventory lag, but I don’t think I entirely agree with that assessment.

I also found this interesting from the Denver Post written in December 2017, “New annual figures from the U.S. Census Bureau’s American Community Survey show that 193,000 Coloradans moved away last year, 10,000 more than in 2015, while 223,000 moved here, down about 4,000 from the year before but still well above recent years.” Article Link. While we are still growing, the growth rates on people moving here are starting to show signs of slowing and we are also seeing some signs of current residents starting to move away with the surge in home prices, increased traffic, and so forth.

On a positive note, the tax cuts that were enabled will be stimulative to the economy whether we like them or not.  I would anticipate we should continue to see some strong economic activity as a result of the tax cuts as they were designed to give us a good 2-3 year jolt.  I attended a class on the economic impact and net results of what they were designed to do and at first glance, they are geared towards being very stimulative to economy in the short term.

So what does all of this mean?  My personal gut feeling is we will see things slow more in the higher end price ranges as that is where all of the inventory sits, but the $400k and under price range doesn’t appear to show any signs of slowing in the near term.  We are also still well below historical norms with inventory levels, so until the supply vs. demand equation can start to level out the real estate market should remain strong but hopefully do some leveling off sooner than later.  Continued population and economic growth will be very telling signs of when we can expect things to start leveling off over the next few years.

By no means should this tilt you one way or another when it comes to making your next real estate transaction whether it is buying for the first time or selling your home and upgrading or downsizing.  That’s where I can be a huge benefit to you in helping you decide what will be a good fit for your situation and assist in making solid real estate decisions for you and your family.  Real estate in it’s very form is a long term investment anyway and should always be treated as such so you can avoid short term speculation.  Feel free to reach out if you or anyone you know has any questions!

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