How High Can the Denver Housing Market Climb in 2016?

“As home values continue to rise, buyers are faced with more challenges in a tighter market, especially in hot markets like Denver…” -Zillow press release, July 30, 2015

Are you thinking about buying a home in Denver, Colorado? If so, you might want to think about purchasing sooner rather than later. Home prices continue to climb higher in the Mile-High City, and they don’t show signs of reversing course anytime soon.

Denver Second-Hottest Real Estate Market

On August 3rd, Realtor.com published its latest ranking of the “hottest” real estate markets in America. This recurring feature ranks local housing markets based on the speed of home sales and the level of buyer demand. In short, markets with the most demand and the fastest selling homes are ranked at the top of the list.

The Denver real estate market appeared at #2 in the national rankings for July.

According to Realtor.com’s chief economist Jonathan Smoke: “Sellers [in Denver and other hot markets] are seeing listings move much more quickly than the rest of the country and at an accelerating pace from just last month.” He added that these hot housing markets are very attractive to buyers, and are viewed on Realtor.com as much as three times more often than the national average.

Case-Shiller Index Shows 10% Rise in Home Prices

At the end of July, CoreLogic and the S&P Dow Jones Indices published the latest Case-Shiller Home Price Index. This long-running and widely cited index tracks home prices across the United States, particularly by focusing on 20 key metropolitan areas.

According to the latest report, home prices in Denver, Colorado rose 10% from May 2014 to May 2015. That was the largest year-over-year price increase of the 20 cities tracked by the index, and one of the largest annual gains nationwide. Denver even surpassed San Francisco (long considered as one of the hottest real estate markets in the country) in terms of annual price appreciation.

From April to May 2015, home values in the Mile-High City rose 1.1%, according to Case-Shiller.

Inventory a Key Factor Driving Housing Trends

Inventory has a lot to do with these trends. A July 30 report by the real estate information company Zillow showed that the Denver housing market had 16.6% fewer homes for sale in the second quarter of 2015, compared to the same period last year.

It doesn’t take a housing economist to connect the dots here (which is good, because I’m not one). Low mortgage rates and economic improvements have put more people in a position to buy a home. This increases demand for housing and brings more buyers into the market. Meanwhile, there are fewer homes for sale today than last year.

Read: Supply is tight in Colorado housing markets

Stronger demand and lower inventory are pushing house prices north. That’s the state of the Denver real estate market in summer 2015, and it’s something we could see more of in 2016.

Outlook for 2016 Calls for Cooling

So the economic team at Realtor.com thinks Denver is one of the hottest real estate markets in the country. But what about next year. Will home prices continue rising through 2015 and into 2016?

While no one can make such a prediction with complete accuracy, all indicators seem to point to yes. Based on current housing market conditions in the Denver metro area, it’s likely that home prices will continue rising through this year and into next.

But there are also signs that this market could begin cooling over the coming months — to some degree anyway. Anthony Rael, who chairs the market trends committee at the Denver Metro Association of Realtors, recently told the Denver Post: “There is a general feeling that things are cooling.”

Here’s one sign the market might be cooling: Recent data show that home sellers in the Denver real estate market are seeing fewer offers above the list price. This suggests that demand for homes could be easing, which in turn could pave the way to a leveling off of home prices. But we are wandering into the weeds of speculation here.

The bottom line: Denver is currently a fast-moving real estate market where home buyers need to be on the ball.

Disclaimers: This story includes data from third parties that are deemed reliable but not guaranteed. It also includes forecasts relating to the Denver housing market in 2016. Such forward-looking statements should not be viewed as facts. They are merely an educated guess based on current conditions (which could change over time). We make no claims or guarantees about future real estate or economic conditions.