Economic and Real Estate Outlook

 Fundamentals are saying that there is nothing to suggest we are due for a recession." - Lawrence Yun on real estate projections in Colorado

     Recently, I had the pleasure of attending the Economic and Real Estate Outlook lunch hosted by the South Metro Denver Realtor's Association (SMDRA).  The presenter was Lawrence Yun, PhD, the Chief Economist for the National Association of Realtors (NAR).  He was able to provide some great insight into the questions that're on everyone's mind: are we in a bubble and is it going to burst?
     The short answer to those questions: no and no.  Because of the steady rate of increase in population in Colorado, and the slow rate at which housing construction and sales are striving to catch up with that number, we will not be seeing a "bubble" or a "burst" anytime soon.  In fact,  it is projected that home prices will continue to rise in Denver for at least the next 10 years.

     Furthermore, Yun included some impressive facts about the state of Colorado's and the nation's economy.  Here are just a few:

• Unemployment rate is at 4% (To economists this number constitutes a fully employed economy)
• 18 million jobs have been added since 2010
• Record wealth (albeit not evenly distributed)
• Denver has shown +25% growth compared to a nationwide average of +13%

Next time you're in a traffic jam just be thankful!  It's because of your good economy." - Lawrence Yun, on Colorado's current economic state

     What does the growth of the economy mean?  Yun projected a few things.  First, mortgage rates are going to continue to rise.  Every time the nation is seeing success, the Fed raises interest rates in order to help pay off the tremendous national debt.  With a continued projection of growth, rates are only going to go up.

    Second, home prices are only going to continue to go up.   However, those people who took the first step to homeownership and bought a condo or starter home, had little difficulty taking the next step and buying their next home.  Consistently only 5%-7% of first time homeowners had trouble affording another home.

     A lot of this may seem scary to someone who doesn't think they can afford a home.  However, buying your first home is significantly more affordable than you think.  It is a myth that one needs at least 20% to buy a home.  In fact, some loans will allow a first time homebuyer to put just 1% down on their home.  Additionally, down payment assistance programs and (of course) Equity for Educators if you're a teacher can help you pay the other up front costs of a home.  I recently got a client into her first condo for less than $2,000.  She received a check back from her lender at closing rather than paying more money.

     Finally, once you have taken that first step into homeownership, you get to reap the benefits of equity.  As shown by the chart at left, homeowners gained over $200,000 more in wealth over time than renters.  With the likelihood that housing prices and interest rates are going to rise, get in on the ground floor and give me a call now.  Let's get started!