2022 Outlook for the Denver Real Estate Market

Jason Cummings | January 4, 2022

real estate insights

2022 Outlook for the Denver Real Estate Market

It’s 2022, and after the year we had in the real estate market it can be hard to figure out what to expect this year and beyond. While it’s impossible to truly predict what the market will do (Why Are Recessions So Hard to Predict? Random Shocks and Business Cycles), the underlying market conditions causing the hot sellers’ market last year are not likely to change drastically in 2022. It may be hard to fathom prices continuing to rise after the 16% appreciation that we saw in 2021, but the persistently low inventory and consistent demand heading into the year means that we’re likely to remain in a sellers market.

Although it may feel like the current market boom is bound to come to a fiery crash, as it did the last time the market was comparable in the years leading up to 2008, economists are confident that the current housing boom is far more stable than the last one and poses fewer systemic risks. According to Nicole Friedman - U.S. Housing Reporter - in her Wall Street Journal article titled The Pandemic Ignited a Housing Boom—but It’s Different From the Last One, the fundamental economic conditions driving this market are vastly different than the conditions that drove the market in the mid-2000s. Put simply, the increases in price over the last 1-2 years have been driven by supply and demand.

These metrics, which are specific to Colorado real estate markets but largely representative of nationwide conditions, highlight the shortage of supply. Since developing and building new homes takes time, even if development ramps up, those effects are not likely to be experienced until the intermediate to long term. Additionally, development has some ground to make up after years of underinvesting following the housing market crisis in the late 2000s. There are two sides to the economic story, and even if supply greatly ramps up in 2022, it is likely that consistently strong demand will bring continued stability to the market.

Heading into 2020, demand for homes was already on an upward trend. When the pandemic struck in 2020, that trend intensified as work dynamics shifted. Those trends are not likely to change in the year ahead. In fact, millennial demand may continue to increase as more in the generation reach their prime home–buying years. To reference Nicole Friedman again, in her 2 articles on the subject: Millennials Help Power This Year’s Housing-Market Rebound and Millennials Are Supercharging the Housing Market “Low interest rates, and a desire for more space as the coronavirus pandemic leads people to spend more time at home, are boosting demand for homeownership among Americans of all ages.”

It’s 2022, and after the year we had in the real estate market it can be hard to figure out what to expect this year and beyond. While it’s impossible to truly predict what the market will do (Why Are Recessions So Hard to Predict? Random Shocks and Business Cycles), the underlying market conditions causing the hot sellers’ market last year are not likely to change drastically in 2022. It may be hard to fathom prices continuing to rise after the 16% appreciation that we saw in 2021, but the persistently low inventory and consistent demand heading into the year means that we’re likely to remain in a sellers market.

So while we cannot be certain what the future holds, it is likely that investing in real estate will remain one of the most important vehicles for wealth.