Market will shine brighter for Denver home sellers than buyers in 2021
2021 brings strong sales but more modest price gains
A lack of inventory and continued demand will keep sellers firmly in control of metro Denver’s housing market next year, but higher mortgage rates will make homes less affordable and keep a lid on future price gains, according to a forecast from Realtor.com.
Metro Denver is expected to see a 12.5% increase in home sales next year, which ranks fourth highest out of the 100 metro areas examined, behind only Sacramento, Harrisburg, Pa., and Charlotte, N.C., according to the forecast released on Tuesday.
But home prices — after revving at a 12.8% annual pace in October — will run a more modest 5.4% locally, ranking Denver 33rd on that measure, tied with Columbia, S.C.
“The steadiness in mortgage rates in the first half of the year followed by the rise of mortgage rates in the second half of the year helps dampen some of the price momentum, as affordability becomes a bigger hurdle again for homebuyers,” said Danielle Hale, chief economist with the residential real estate portal, in an email.
She forecasts U.S. home sales will rise 7% next year, with home prices up 5.7%.
In her forecast, Hale calls for rates on a 30-year mortgage, now below 3%, to rise to 3.4% by the second half of next year, meaning they won’t help offset record-breaking prices. Given how elevated prices are in metro Denver relative to incomes, buyers here may have a harder time digesting the added costs.
She said sellers will continue to hold the upper hand, even as more of them are forced to list due to the expiration of forbearance agreements, which have allowed millions of households to skip making mortgage payments for up to a year. That added inventory from struggling borrowers will likely be spread out over several months rather than hitting all at once, giving the market more time to absorb the new supply.
So what is keeping demand so strong given such a difficult year? Zillow senior economist Jeff Tucker estimates there are 5.7 million “missing” households since the Great Recession, including adults still living with parents or doubled up with roommates. The median age for purchasing a home in the U.S. is 34 and many millennials are anxious to get a place of their own.
Nationally, there will be 7.4% more people turning 34 in the next decade than in the past decade, with Boston and San Diego seeing gains of prime-age buyers jumping more than 19%. Boston and Columbus, Ohio, are expected to see increases in prime-age buyers above 15%, according to Zillow.
In that regard, Denver may see less buying pressure in the years ahead, with only a 1.8% increase in people turning 34 in the coming decade compared to the last one. Some of that reflects the surge in older millennials who moved here after the last recession and who fueled strong buying demand.