According to a recent report from California-based analytics company CoreLogic, high home prices in Denver might not last much longer. Last week, we published a story that put home prices in Colorado on the upper end of the national scale at $415,000 on average, with Denver being higher than that at $500,000 for a single-family home. The CoreLogic report suggests that these homes in the Denver area are overvalued with asking prices being higher than what the future demand of the market can support.
When interviewed by Denver-based publication Westword, CoreLogic’s chief economist stated that around 50% of the 100 largest metros in the country have a real estate market that is overvalued, including Denver. This comes after a time of rapid home value growth in Colorado (and the rest of the country), with home values in the Centennial State jumping 8.4% in a single year from February 2017 to February 2018. While this jump seems huge, Colorado tied California for the 7th largest boost, with Washington leading the pack at an average increase of 12.5%. It’s also worth mentioning that the national average during this same time frame was a 6.7% increase. Reasons for this real estate boom in Colorado are thought to be a high demand coupled with a low volume of available homes.
By taking a look at home values compared to local income, CoreLogic has determined that much of the Front Range is overvalued, including Denver, Boulder, and Fort Collins – but not Colorado Springs. In places where overvalue occurs, the question becomes how long it can be sustained. It is expected that the market will soon adjust, dropping this inflated value to compensate for the market.
The suggestion of overvalued homes along the Front Range isn’t much of a surprise as concern with a growing cost of living is one topic that OutThere Colorado readers mention frequently in online discussion, often leading to heated debates. If this writer had to guess, inflation of home value is likely a result of Colorado’s quick growth, as the real estate industry has been left scrambling to adjust. Granted, in 2016 Colorado had the lowest net-migration number in seven years. As of right now, we don’t have the data from 2017, but if this trend continues, it could indicate a shift in population growth. That being said, places outside of Denver are starting to get noticed, with cities like Colorado Springs getting major attention on a national scale. Could this create a new influx of people seeking to move to places in Colorado besides Denver at a higher rate, thus creating the same issue elsewhere? Perhaps.
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