Metro Denver’s real estate market remained hot through 2021, with record demand for homes pushing appreciation and sale prices to record highs.
Three real estate experts expect those trends to continue in 2022 with some possible tweaks.
“I don’t see any big dynamic shifts coming,” says Ryan Carter, president of 8z Real Estate. “The rate of appreciation may soften slightly, and it would be a lot healthier for the market to not continue to see high double-digit growth.”
Barry Willmarth, Willmarth Real Estate Services owner, agrees. “My initial thought for 2022, is that home prices will continue to rise but the appreciation rate will ease despite inflationary pressure, as buyers recognize the reality of a possible bubble.”
But he cautions that he expected home prices in the Denver metro would ease a couple of years ago, but that hasn’t happened. Willmarth anticipates sellers will continue to receive multiple offers over their asking price.
“I don’t think anyone would argue with me if I said the 2022 real estate market will continue to be ‘competitive.’”
Nick DiPasquale, West + Main broker, predicts home prices will continue to rise.
“For the most part, 2022 should see a similar trajectory with a potential for an even wilder ride than we have seen over the past two years.”
Potential interest rate increase
All three real estate experts anticipate the Federal Reserve will raise interest rates to help stem inflation. But a rate increase likely won’t hurt Colorado’s market.
“As a whole, there will likely be little impact on the resale market as that is driven more by supply and demand,” DiPasquale says. “The refinance market will certainly be impacted if rates rise above pre-pandemic levels.”
Willmarth says if rates increase, it likely won’t be significant for Colorado buyers until at least the second quarter of 2022. “After that, it may help buyers take more time in assessing a home purchase.”
Both Carter and DiPasquale say rising interest rates could hurt buyer purchase power, especially first-time homebuyers.
“Shifts as subtle as one-eighth of a percent can affect buying power by up to $10,000 to $15,000. 15k. It doesn’t sound like a lot in this market, but if you are trying to buy a home at $525,000 and the rate inches up, you may now only be able to offer $510,000 or $515,000,” DiPasquale says.
“In a competitive situation, that can be the difference between getting a home or not.”
Building boom to continue
The real estate experts anticipate builders will continue to meet the housing demand.
“As long as Denver remains a destination city with population growth, the building boom is here to stay,” DiPasquale says.
Willmarth says builders will continue to pass any higher costs due to fluctuating lumber prices or supply chain issues to consumers who, so far, are willing to pay them. But he warns the most significant potential roadblock to home construction is a continuing skilled worker shortage.
Still want space to breathe
Homebuyers moved to the suburbs during the pandemic, searching for larger houses on bigger lots. They wanted added space to accommodate their needs to work from home and let children learn remotely. That desire likely won’t change in 2022.
“This work- and learn-from-home revolution is going to be part of the new normal,” DiPasquale says. “The technology supports it and many companies are seeing productivity gains from employees while lowering operating overhead. With up to two parents working from home and children learning from home, more space will continue to be paramount.”
Carter agrees. “We’ve just seen the tip of the iceberg of this new perception of home.”
But he cautions the pandemic also will lead some families to downsize and others to move to more affordable areas.
But affordability remains relative, as homebuyers leaving large metro areas on both coasts help fuel rising home prices in Denver and other Mountain West cities, according to Realtor.com’s Top Housing Markets for 2022 report.
Those transplants helped make the Mountain West the hottest area of the country, with Salt Lake City, Utah; Boise, Idaho; and Spokane-Spokane Valley, Wash., ranking as Realtor.com’s top three markets for 2022. Denver sits at No. 48 on Realtor.com’s list.
$1 million isn’t what it used to be
As home prices continue to rise, more sales prices cross the $1 million mark. The number of metro Denver houses selling for $1 million or more increased by more than 50 percent in the first 11 months of 2021, from 3,544 in 2020 to 5,548.
And with the average price in Denver hovering around $700,000, a $1 million home may no longer fit the public’s definition of luxury, Carter says.
Willmarth predicts more sales for $1 million-plus in 2022 and beyond. “The luxury market is as competitive as it’s ever been. There is a surplus of buyers, low inventory, and sales are up dramatically from a year ago.”
But he cautions, “A million dollars certainly doesn’t buy what it used to.”
DiPasquale agrees. “If we look at it from a quality perspective, you are still purchasing luxury homes at the $1 million mark. What is changing is the size of home you can buy for that price. Where it used to be 5+ bedrooms is now 4 bedrooms or even 3 in some areas.”
Polishing the crystal ball
“Every year seems to bring some type of change in local markets especially with the economic variables in the world today,” Willmarth says. “I predict the market will be competitive and we should expect something to happen that is unexpected.”
DiPasquale anticipates the new year will bring new buyers into the mix.
“The year 2022 will be decided by how everyone who has been sitting on the bench through COVID decides to act,” he says.
“So many homeowners wanting an upgrade or a move have been turned off by a seeming lack of replacement home options. Expect 2022 to be another very healthy year for the market, but if that pent-up purchasing (and selling) power is unleashed, we could be looking at an unprecedented year in the Denver metro housing market.”
Carter predicts demand for houses to remain high, which he says puts more pressure on real estate professionals to help buyers and sellers find new ways like modern bridge loans to navigate the market.
“People feel paralyzed. They may want to sell and move but don’t feel like they have options,” he says. “The industry needs to continue to innovate so buyers can feel confident to make a move.”
The news and editorial staffs of The Denver Post had no role in this post’s preparation.
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