CoreLogic is predicting that metro Denver home prices will drop by 9% by May 2021. Why? First, they believe our real estate market is over-valued when you look at real disposable income per capita, which has grown at a slower pace than home prices. I hate to tell them but home prices have increased faster than income levels for the last 40 years in Denver and across the country. How can people still afford homes you ask? In 1980 mortgage rates were 18%. Today they are under 3%. The average price of a home in metro Denver in 1980 was $75k according to my charts from Your Castle RE. If a home buyer put 5% down then their principal and interest payment at 18% was $1074 a month. Today at 2.875% you can borrow $258k and have the same monthly payment!
Second, CoreLogic believes our home prices will drop because our unemployment rate will soar because "A large share of Denver jobs are in industries that have suffered as a result of Covid-19, such as mining, logging, and construction and trade, transportation and utilities." I hate to tell CoreLogic or CluelessLogic that Denver doesn't have many jobs in mining or logging. And a huge majority of the jobs lost in Denver have been in the service and retail sectors and very few of those people own a home.
Next, how will home prices drop when we have less than 1 months of inventory and have been under 2 months of inventory for 7 years? I think someone forgot to tell CoreLogic about Bidding Wars and what does to home prices.
Finally, you typically don't see home prices drop without thousands of distressed sales. Before Covid Denver had the second lowest mortgage delinquency and foreclosure rate in the country! Plus a HUGE majority of Denver homeowners have over 20% equity in their homes that they will not give up without a fight.