11 Predictions for Denver Real Estate in 2019 and Beyond
None of us can foresee with certainty the future of the local housing marketâbut we do have a cadre of real estate agents, mortgage consultants, and economists who helped us make some compelling conjectures. Come along as we part the mist on Mile High City real estate in the weeks, months, and years to come.
The market will slowâjust a littleâthis year.
Buyers, take a breath. A small one. And make it quick, because you still canât afford to take your sweet time deliberating over whether to stretch your budget to get that extra bathroomâeven as the market will likely affect aÂ slightlyÂ more leisurely vibe in 2019. Littleton-basedÂ Development Research PartnersÂ is forecasting a six-year low for existing home sales closed over the entire year (see graph). Multiple bids will continue to be the norm; however, come July and August, Heather Heuer, senior vice president of sales operations forÂ Liv Sothebyâs, expects higher inventory to allow buyers a little more time for deliberation. That could be enough to temporarily slow the feeding frenzy around new listings. Recent buyers and would-be sellers can still enjoy nice, deep, self-assured inhales, though, because our economy is now diversified enough (thanks tech, health care, and marijuana booms) to maintain its robustness. Says Heuer: âThe bottom dropping out isnât going to happen.â
Interest rates will remain stable in the near term.
The average interest rate for a 30-year fixed mortgage at press time (early April): ~4%. Thatâs almost a half percent down from where rates were in early 2019, which may sound like good news for home shoppersâbut the tantalizing rates could encourage more buyers to jump into the market, increasing competition. Regardless, experts expect rates to stay in the low fours this year.
Millennials and baby boomers will flood the market, in some cases competing for the same properties.
At about a quarter of our population, millennials are the largest generation in the Centennial State, on track to account for 45 percent of mortgages in 2019, according to realtor.com. Plus, the largest cohort of millennials is approaching 30, an age at which that demographic, broadly speaking, is transitioning to a more stable lifestyleâand, perhaps, finally able to scrape together a down payment. âThey donât necessarily need the square footage,â says Libby Levinson, a broker associate atÂ Kentwood Real Estate. âThey want the lifestyle; they want to be living their best lives on Instagram and have access to things that let them do that.â
Then thereâs the baby boomersâmany in or nearing retirementâwho make up 22 percent of Coloradoâs population. Theyâre often still active and healthy but, if they can afford it, are looking to trade five-bedroom homes outside the city for smaller floor plans in walkable neighborhoods. âBoomers donât want to have to maintain empty space,â says Liv Sothebyâs Heather Heuer.
What all that means is a two-bedroom bungalow in Highland or a condo in Cherry Creek may pull in offers from both demographics. Who will win out? Who knows? But this (highly generalized) breakdown of where their dream homes intersect and diverge could help buyers in both categories target properties that are less attractive to the other generationâaka the competition.
The slot home slap-down will continue to change how developers look at infilling burgeoning areas.
Itâs difficult to create a neighborly, wave-from-the-front-porch feel in a community when homes donât have front porchesâor even true front doors. That was the concern of residents in neighborhoods like Jefferson Park and Highland, where âslot homeâ designs (those boxy multifamily housing units perpendicular to the street, sometimes facing each other with a space between) have recently proliferated. Denverâs City Council responded to the vocal opposition by unanimously passing an amendment a year ago that essentially banned the design in certain zoning districts, to great fanfare from local city planners and architecture buffs. The news wasnât as happily received by developers, though: Lots that couldâve held more dwellings via slot home designs will see a 30 percent reduction in unit density, according to Ben Gearhart, co-owner ofÂ Modus Real Estate, which develops and sells property primarily in northwest Denver. To manage costs and keep prices attainable for buyers who find modern rowhome-style living in dense, walkable areas attractiveâincluding millennials who are priced out of the stand-alone bungalows and Denver Squares in popular urban areasâsome developers are becoming more creative with designs and floor plans. Others have redirected operations to areas where they can still build slot homes. Says Gearhart: âThere was a lag time [in new units] while we worked out the kinks.â
Prospective new-build buyers will need to look closely for quality issues.
Thereâs something exciting about a never-been-lived-in home: the shiny appliances, the unmarked walls, the scuff-free floors. This is especially true considering the painful asking prices for some of central Denverâs older homes, many of which straddle the line between âhistoric charmâ and âgut it to the studs.â But donât let the clean lines and airy floor plans of those three-story, new-build townhomes in Jefferson Park or Five Points lure you in without doing your due diligence on the craftsmanship.
âIâm not saying donât buy new construction,â says Kentwood Real Estateâs Libby Levinson. âIâm just saying keep your eyes peeled. Many builders offer a one-year bumper-to-bumper warranty, but I suggest addressing as many issues prior to closing as possible.â In particular, pay attention to the following seemingly minor detailsâsome of which can be surface-level red flags for deeper shortcomings in the construction processâbefore signing on the dotted line:
Check the trim on doors and baseboards. Nail holes or open seams may mean the builders skipped solid wood in favor of another product or rushed the finishing stage.
Look for cracked and uneven grout lines or split caulking in tiled areas, like between the kitchen counter and the backsplash. These issues could signal movement in the house.
If you see dings or marks on the cabinets or notice a door that catches when it opens, ask that it be fixed before move-in. It can be a hassle to repair a single cabinet after you close.
Savvy buyers will take chances on Denverâs next-big-thing neighborhoodsâand cash in, if they choose correctly.
Forget Wash Park and Highland. And honestly, Sloanâs Lake, Baker, and Berkeley arenât really up-and-coming anymore either. (Pssst: Theyâve already arrived.) That doesnât mean, however, that the next âitâ Denver âhood isnât out there. We polled nearly a dozen real estate experts to find out where theyâd consider taking calculated risksâand why.
Neighborhood: West Colfax Current vibe:Â Centered on its namesake artery, West Colfax is bustling but dated in a rundown-motel kind of way, with pockets of artistic revitalization. Transformative factors:
Community investment in projects like a redesign of the dangerous interchange at West Colfax Avenue and Federal Boulevard
Spillover development from the amenity boom in adjacent Sloanâs Lake (Alamo Drafthouse Cinema and Tap & Burger Sloanâs Lake, for example)
Look for:Â Recently constructed townhomes starting in the $400,000s Caveat:Â Thanks to an amendment that restricted slot home designs (see Prediction 4), inventory may dip while developers literally go back to their drawing boards.
Neighborhood: Sun Valley Current vibe:Â Industrial lots coexist with mainly public housing, and the area is isolated from most city amenities by waterways and poorly planned thoroughfares. Transformative factors:
A $376 million public housing redevelopment plan that will raze 333 subsidized housing units and replace them with 750 new mixed-income units, including moderate-income and market-rate homes, by the end of 2024
A master plan to overhaul the parking lots surrounding Broncos Stadium at Mile High into a walkable urban entertainment district
The ambitious, estimated 20-year RiverMile project that would create a bustling waterfront enclave along the South Platte River
Look for:Â New-build multifamily residences (prices are TBD as Sun Valley is an untested market for new construction) Caveat:Â Construction chaos will play out in this historically low-income neighborhood for years, as will passionate debates about the ramifications of resident displacement.
Neighborhood: Elyria-Swansea Current vibe:Â Factories, rail yards, and the interstate serve as less than desirable backdrops for single-family homes. Transformative factors:
The $1 billion National Western Stock Show Complex overhaul, projected to draw more than two million visitors annually after construction is completed in 2024
The $1.2 billion Central 70 Project (reconstruction and expansion of I-70 between Brighton Boulevard and Chambers Road over the next three to four years, including a four-acre park that will be built over the newly lowered stretch of interstate)
Look for:Â Condos and townhomes in the $400,000 to $450,000 range, with improved roads and a cleaned-up South Platte River zone Caveat:Â On top of gentrification concerns, the widespread construction isnât helping chronic pollution issues in the area.
Neighborhood: Athmar Park Current vibe:Â Older homes that have retained their character but may need face-lifts populate this undiscovered, modest area, the gem of which is Huston Lake Park. Transformative factors:
Developers pulling permits for projects on West Alameda Avenue, west of South Santa Fe Drive
Two recent grants from Kaiser Permanente that helped the areaâs already strong neighborhood association form an Active Living Coalition to address transportation and mobility issues in the neighborhood, including bike and pedestrian access, streetscaping, and traffic safety
Look for:Â English Tudors and ranches that, in the high $300,000s to mid-$400,000s, are still within reach of some first-time buyers Caveat:Â These are likely dated homes that need work. The money you spend on remodeling should ultimately be a winâbut you have to invest without proof the area will turn around.
Buyers will work the calendar to their advantage in 2019.
Fueled by low inventory levels between 2013 and 2018, the Mile High City became one of the nationâs hottest sellerâs markets. That wonât change dramatically this year. But it might be âa less good sellerâs market, for lack of a better way to put it,â says Megan Aller, an account executive atÂ First American Title Insurance Company. Buyers should capitalize on more favorable timing by using our adaptation of Allerâs 2019 strategy sheet of projections for detached single-family homesâessentially a horoscope for real estate in the Denver metro area.
Active Listings Buyers beware: When fewer homes are for sale, competition increases, which drives prices up.
Homes Sold More successful closings (these homes likely went under contract 30 days prior) is a sign of higher buyer activity, thus more competition, which is an advantage for sellers.
Percent of Asking Price Received by Seller Numbers over 100 percent in this row mean multiple offers are likely, due to fewer listings and more buyer activity. In April, May, and June, homes have closed, on average, above asking price for the past seven yearsâi.e., be prepared for bidding wars.
Change in Average Sale Price from Previous Month Rising demand and short supply nudge prices up in late winter and early spring, but come midsummer, house-hunting fatigue sets in. Inventory goes up, giving buyers more negotiating power and (gasp!) perhaps even forcing price cuts.
Average Days on Market Homes listed in March, April, and May (with probable closings, then, around April, May, and June) are likely to sell faster than those at any other time of yearâmeaning the market was good for sellers who got their homes ready in time for the beginning of real estate season.
Months of Inventory A six-month supply of housing is where the stars align for a balanced market, in which neither party has a distinct advantage. Metro Denverâs consistently low inventory still favors the seller, but looking ahead in 2019, August, September, and October look to be the most auspicious months for buyers.
Granny flatsâalso called mother-in-law suites or accessory apartmentsâwill become more popular, as long as local municipalities ease up on regulations.
Less than four months ago, Denver City Council approved zoning changes in Elyria-Swansea that gave a few residents the go-ahead to build accessory dwelling units (ADUs) on the same properties as larger homes. The special dispensation was OKâd in an attempt to restore housing density to an area blighted by the I-70 expansion. But for many, the idea has merit as more than just a concession for razed homes. A studio over the garage, for example, could allow more members of a family to live on the same plot of land, potentially defraying mortgage costs. Or a small cottage or carriage house in the backyard could generate rental income.
Despite what seem to be the many upsides of ADUs, they are verboten in much of the city, partially because residents fear they could encourage overcrowding. Only after the zoning code was replaced in 2010 were they allowed in certain neighborhoods that advocated for them, like Curtis Park; since then, more than 200 ADUs have been built citywide. However, that all may change with the next iteration ofÂ Blueprint Denver, the cityâs 20-year land use and transportation plan. (At press time, it was headed to a City Council public hearing and vote on April 22.) The new plan recommends allowing ADUs in all residential neighborhoods and eases previously restrictive construction regulations. âThere is a huge demand,â says Kassidy Benson, managing broker and owner ofÂ Living Room Real EstateÂ in Denver. âA lot of people Iâm talking with are getting ready to have kids, and they want this type of housing literally for a mother-in-law, or for a nanny; or they have kids graduating from college who donât want to live with them but need to.â
Even if the red tape is cleared away, ADUs face another hurdle: expense. According to Benson, the projects rarely cost less than $200,000âa prohibitive upfront figure for many families who might be dreaming of adding a rental unit for extra cash. Still, she likes to imagine the potential positive impacts to the cityâs neighborhoods: âAs ADUs start to come in, alleys will become more like streets,â Benson says. âTheyâll become activated, versus the way it is now, with trash cans and cars coming in and out of garages.â Inspired by her utopian vision? Living Roomâs website maintains aÂ searchable databaseÂ of current ADU-zoned properties for sale in Denverâand that could mean good news for Granny.
First-time home shoppers will learn to love Denverâs increasingly urban suburbs.
On a recent sunny Saturday afternoon, my husband and I walked a little more than a mile from our 2,300-square-foot, recently renovated four-bedroom houseâwhich we purchased in July 2017 for $405,000âtoÂ Denver Beer Co.Â The brewery was buzzing but not overcrowded; we easily found seats on the patio at which to sip our Incredible Pedal IPAs in the light of the fading sun and, later, under the glow of the twinkly cafe strands strung above us. To anyone whoâs shopped for houses within strolling distance of Denver Beer Co.âs LoHi taproom, this probably sounds like a dream sequence. But as thirtysomething first-time homebuyers, itâs our realityâin Arvada, that is, where the popular beer-maker has a second location.
The decision to leave the Mile High City wasnât easy. Three years in a 500-square-foot Baker rowhouse, however, had us craving more spaceâfor our 60-pound husky, for dinner party guests, and for the family we hoped to grow. When we started comparing costs (today, prices in the downtown Arvada area average $381,000, versus $585,000 in Highland), our attachment to a Denver zip code quickly waned. Plus, Arvada feels decidedly urban in many ways. The northwest suburbâs Olde Town area boasts three breweries; a winery; more than a dozen nonchain restaurants and cafes; shops that range from a fly-fishing store to a hipster haven called Vouna complete with beard oils, air plants, and a live-in rabbit named Emma; a seasonal Sunday morning farmersâ market; and a stop on the G Line (set to open on April 26, as of press time) to Union Station.
Of course, Arvada isnât the only neighboring city urbanizing business districts to entice residents. Englewood, for example, hired its first chief redevelopment officer in 2018 to shepherd the rebirth of key areas like the South Broadway corridor and CityCenter, a 55-acre, transit-oriented development site at South Santa Fe Drive and Hampden Avenue. With Denver claiming the title of the 13th most expensive housing market among metropolitan areas in the country and wages generally failing to keep pace, more would-be homeowners will inevitably expand their search parameters to include the âburbs. My message to them? Come on in. The waterâand the beerâis better than fine. âJessica LaRusso
Artificial intelligence will replace both the MLS and human real estate agents.
We kid, we kidâ¦kind of.Â REX, a Los Angelesâbased real estate tech startup that expanded to Denver in 2018, has already taken the first step by offering clients a flat two percent fee (versus the typical five or six percent) to list their properties. Then, REXâs software pushes the listing out to likely homebuyers via digital channels like Zillow and Facebook. âREX looks at consumer search patterns, purchasing habits, life-event patterns like having a child, and census data and triangulates that info with the house thatâs for sale,â says Jonathan Friedland, REXâs head of policy and communications. Until the machines fully take over, what are the benefits and drawbacks of using REX?
Since REX doesnât list on MLS, sellers donât pay a buyerâs agent commission. So on, say, a $750,000 home, the model could save you $30K.
Instead of waiting for the perfect buyer, REX proactively markets your listing to people its algorithms have identified as strong candidates.
REX claims it streamlines what can be a complex transactional process, eliminating paperwork and lengthy contracts.
Serious buyers are still attached to the MLS, where most homes are listed.
Because the model is built on the assumption that the buyer is not using an agent either, shoppers who insist on working with their own agents but end up purchasing homes listed on REX may need to cover their agentsâ fees.
Algorithms and bots still canât grasp those critical yet intangible factors, like emotional attachment to certain areas or the nuances of taste.
Developers will continue to favor apartment construction over building condominiums.
The cranes dotting Denverâs skyline make it clear that multi-unit, mixed-use construction is afoot. But will those eventual dwellings be for lease or purchase? Metro-area renters may well be hoping for more entry-level condos where they could maintain their urban lifestyles and build equity for the same or even less monthly output. We asked Steve Ferrisâa city planner who founded the Denver-basedÂ Real Estate GarageÂ to help developers and landowners usher such complex projects through approval, zoning, and government negotiation processesâto explain why condo proliferation isnât likely to happen.
5280:Â Labor and land shortages are issues for both types of buildingsâso whatâs driving the continued apartment boom? Steve Ferris:Â People are dissatisfied with their real estate options, and theyâre more transient with their lifestyles. Plus, an apartment isnât a bad return for a private equity firm; itâs one of the safest investments anyone can make, so the capital is there.
Arenât there more hoops to jump through when youâre building condos, too? Yes. Apartments are easier to get done. Apartment developers can put land under contract in 120 days. Condo developers have to ask the owner to hold the land while they work on getting enough presales to get financing.
Does that mean thereâs an oversupply of apartments? There will be an oversupply, but supply and demand will even out in two to three years, assuming economic conditions stay positive and jobs keep showing up.
Could current apartment buildings ever be converted to condos? Possibly, but apartments are built differently. For example, most arenât individually metered for heating and cooling, and the sound-protection barriers between units typically arenât built [to the standard of] condos.