Nobody Has a Crystal Ball [Analyze This]

The summer season is wrapping up. At the moment, the team at House Einstein is actively engaged in multiple real estate deals and focused on helping our clients successfully navigate the process to buy and sell property. With that said, this is traditionally the time of year when peak market activity wraps up and we can begin to devote a bit more time to analysis.  

As we've been riding a wave of market activity, I've been wondering about what lies ahead. Record low mortgage rates, an artificially delayed seasonal market (due to Covid), and ultra low inventory for detached single family houses is likely going to show up as a dramatic bump to appreciation. To understand this better, I did some analysis. 

The chart above is the S&P Case-Shiller Home Price Index for the Denver-Aurora MSA. It's a seasonally adjusted, matched pairs analysis for real estate transactions in Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park Counties. It's arguably the most accurate gauge of home price gains/losses available. Instead of showing the index traditionally, I've presented it as year over year gains/losses. I've also highlighted two periods of much stronger appreciation (red circles) for reference.  

The most current data only goes through May, so we'll have to wait a bit to see how prices responded. When the data is released, I expect to see a healthy bump, perhaps to record levels, but what happens next? How will the current high inventory levels for attached dwellings dampen gains? What about all the migration from other states we keep hearing about (and that we're experiencing, anecdotally)? Plus, it's an election year. 

Here's my forecast: those who can migrate away from high-crime, high tax, and low opportunity locations will continue to do so. It will be a record number. Those with work mobility, which is now greater than any point in history, will be more motivated than ever to seek greener pastures. No matter who is elected in November, this wave of migratory Cultural Creatives will likely overwhelm short-term supply increases caused by job losses. Also, job loss driven supply increases will likely occur at the entry level of the market, not the mid and upper level. We simply weren't building enough to adequate meet demand even before Covid. The supply shortage will get worse after, particularly for single family detached houses. Meanwhile, mortgage rates are more likely to decrease, adding fuel to the fire. 

As always, we're driven to help our clients find opportunities and maximize the potential of the market - whether you're buying or selling. If you're thinking of getting in the market, give us a call. Our goal is to help you make a smarter real estate decision

We'll update this post in a few months, as new data is released. 

Osman Parvez  is the Founder and Employing Broker of House Einstein. Originally from the Finger Lakes region of New York, he lives in Boulder with his wife and their Labrador Retriever. He has been a Realtor since 2005.

Osman is the primary author of the House Einstein blog with over 1,200 published articles about Boulder real estate. His work has also appeared in many other blogs about Boulder as well as mainstream newspapers, including the Wall Street Journal and Daily Camera. For more information, click HERE.

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties. House Einstein strongly recommends conducting rigorous due diligence and obtaining professional advice before buying or selling real estate.  

Please Note

This document contains forward-looking statements. You are strongly cautioned that investment results are subject to business, economic and other uncertainties. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time. Always consult your financial advisor before making an investment decision.