Denver Real Estate Market Update | November 2023

Navigating the Complexity: The Denver Real Estate Market in Late 2023

Denver’s real estate market exemplifies the interplay between challenges and opportunities in an economy characterized by resilience and paradoxes. As the Federal Reserve held interest rates steady for the second consecutive time on November 1st, echoing the broader economic context of wait and see, Denver’s housing landscape reflects both the promise of wealth creation and the hurdles in its path.

Economic Resilience Amid Uncertainties

The United States, in the third quarter of 2023, showcased a robust economy with a GDP growth of 4.9%, more than double the previous quarter. Consumer and government spending remained high, demonstrating a resilient economy. The resiliency is further supported by a sturdy labor market, with the most recent unemployment rate at 3.8%, ADPs slower but still positive 113,000 jobs created, over 9.55 million job openings, and a ratio of 1.5 jobs available for every job seeker.

However, the promising scenario is tempered by global and domestic stressors that are impossible to ignore. Core inflation, down from its peak of 5.6%, seems stuck at 3.7%, significantly above the Fed’s 2% target and at risk of rising again. Fears of a wider Middle East conflict threatens a fragile world economy and an upsurge in energy and food prices. Domestically, an increase in the cost of everything weighs heavy as 80% of Americans depleted their stimulus savings and have now racked up over $1 trillion in credit card debt. Not only is Main Street America building a heavy debt load, but so is our national counterpart. It now takes almost $2 billion every single day to service our over $33 trillion in national debt.

Denver’s Housing Market: A Tale of Contrasts

Amid these economic dynamics, Denver’s real estate market presents a nuanced picture. Active listings have seen a 2.63% year-over-year gain, providing a glimmer of hope for potential buyers with increased choices. Yet, as affordability and mortgage rates remain high, not all buyers see the inventory gain as hopeful. Mortgage purchase applications continue their descent, dropping 9% during October, and are at their lowest since 1995.

Although the median home price is 2% lower than last year, it is still a staggering 38% higher compared to 2019. This dichotomy indicates that while minor corrections may exist, the overarching trend is toward higher valuations. New listings are down by 19% from last year, and closed homes are down 20%, indicating sellers are holding onto their lower fixed mortgage rates and holding out for higher prices, thus contributing to a constricted supply.

Investor Interest and Market Dynamics

On the buy side, the “Big Three” Institutional investors, Blackrock, Vanguard, and State Street, are not slowing down. Together, they constitute the largest shareholder in 88% of the S&P500 firms. In their continued quest to diversify, real estate provides longevity. These investors have the ability to secure capital at rates 30% lower than even the wealthiest individuals, giving way to predictions from the likes of RFK Jr and Metlife that these entities could own between 40% and 60% of America’s single-family homes by 2030. Continuing to put pressure on home prices as they gobble up housing inventory independent of mortgage rates.

Implications for Homeownership and Wealth Creation

Despite the headwinds, homeownership remains a compelling avenue for wealth creation. While the pathway to homeownership is characterized by less affordability and increased difficulty, the intrinsic value proposition of real estate as a means of asset accumulation and wealth creation remains assured.

Strategic Navigation: The Way Forward

For sellers in Denver, the current market dynamics necessitate a deeper understanding and strategic approach to optimize the equity they’ve gained, understand their true blended rate, and (of course) get the highest price possible for their home. Vigilance and strategic timing are crucial for buyers seeking homeownership as a wealth creation strategy or simply a roof over their heads.

Harnessing Opportunities Amid Challenges

Bottom line: the Denver real estate market continues to present opportunities for astute and strategic participants, despite or maybe because of its challenges.

Navigating this landscape requires a balanced approach, combining caution with optimism. Despite the hurdles, the pursuit of homeownership remains an integral part of the American ethos, symbolizing stability, prosperity, and the realization of a cherished dream.

Well, that’s a wrap.  Until next time, this is Nicole Rueth with the Rueth Team.  It’s my pleasure to keep you updated.

Nicole Rueth
Producing Branch Manager with The Rueth Team Powered by Movement Mortgage