A big story in the Denver Post this past Saturday was this story based on predictions by Location Inc. They are predicting that metro Denver home prices will peak in the first quarter of 2021 and that average home prices will fall on average 10.5% over the next 5 years.

 

Location Inc.’s “Model looks at dozens of variables, but one of the most important is affordability—to what degree can incomes support home values.” Economists love to tout this variable as incredibly important; but is it that important?

 

If affordability was so damn important home prices in Honolulu, San Francisco, Oakland, San Jose, L.A. San Diego, Boston, NYC would all be under $500k or even $400k all the time. Affordability is of mid-tier importance to me. Here are the variables that drives every real estate market in the country and have done so for centuries.

  • Job growth
  • Population growth
  • Economic growth
  • The supply of new housing units being built
  • Months of supply of existing homes for sale