Metro Denver’s housing market defied the odds last year, shattering one record after the other. But two economists warned an online gathering of local Realtors that the surge won’t continue and to temper their expectations for 2021.
“I have a little bit of bad news. The months of 2020, from August to December — that is as good as it gets. It won’t get better. It is over,” Elliot Eisenberg, also known as the “Bowtie Economist,” told the Denver Metro Association of Realtors’ Economic Summit during a Zoom call Friday.
Eisenberg compared the Denver-area housing market to a driver who was going 65 mph heading into the pandemic, slammed the brakes and slowed down to 25 mph during the lockdown and then accelerated hard, reaching 90 mph until the engine couldn’t go any faster.
Patty Silverstein, the chief economist with Littleton-based Development Research Partners, backed up Eisenberg, predicting that while new home sales should match the pace of 2020, existing-home sales this year will fall and price increases in the months ahead will be more subdued.
Distressed sales and foreclosures could rise significantly from low levels as forbearance plans granted by the CARES Act expire and borrowers look for an exit strategy. She said people may freak out when they see how much foreclosures rise, but the market desperately needs inventory and the surge won’t be detrimental.
Silverstein suggested that a cooling in the region’s housing market will prove a good thing for a variety of reasons and told the agents to not “go crying home.”
“The problem that Denver faces is the cost of housing, it is just expensive,” Eisenberg said.
Metro Denver may seem like a bargain to Californians or New Yorkers, but for much of the country is has become an expensive place to live. That has implications for the region’s attractiveness to employers looking to bring jobs to the state and individuals wanting to move here, not to mention creating added financial stress for households as mortgage and rent payments consume a larger share of each paycheck.
If there is one thing he could do for Denver and Colorado as a whole, Eisenberg said it would be to find a way to allow builders to construct homes at a lower cost.
Population growth in Colorado was already slowing before the pandemic and dropped even more last year as couples delayed having children and the number of deaths rose. And while Colorado is still winning against other states in drawing residents, fewer people are moving around overall than in past decades, Silverstein said.
Eisenberg said the U.S. economy has entered a slow patch because of the surge in COVID-19 cases and the expiration of stimulus programs passed in the spring. That showed up in Friday’s jobs report, which recorded a monthly drop of 140,000 in nonfarm jobs, the first decrease since April.
People should prepare mentally for a sluggish first quarter, but he added more vaccines are coming, more stimulus is coming, and spring, with its warmer temperatures, is coming.
“We are not stuck in the situation. This is not another new recession,” he said.
