Denver Metro Assn of Realtors holds Economic Summit 2022


The Denver Metro Association of Realtors (DMAR) is comprised of over 8,000 realtors and industry partners across metro Denver. It is the largest local realtor association in Colorado and “strives to enable members to reach their maximum earning and career potential while offering the highest level of service to their clients and to the real estate community at large.”

DMAR held its annual Economic Summit 2022 on January 11 virtually. Nicole Rueth of Fairway Independent Mortgage Corporation opened the program by pointing out that, “Liquidity is spurring demand, which is increasing the price of everything.” She noted that, during 2021, “Real estate in the Denver area is up 18%,” and a median two-bedroom rental in metro Denver went from $1,545 to $1,805. She also noted that, “Quarter three (July-September 2021) added more than $250 billion to Americans’ already record levels of tappable equity on leveraged property. That doesn’t even include the 38% of Americans whose homes are paid in full.” Rueth also pointed out that 80% of Americans’ equity and 62% of their net worth is in their home.

Andrew Abrams, COO and broker-owner of BSW Real Estate and the market trends chair of DMAR, presented data that showed that there were only 1,477 active listings of residential homes in metro Denver, including detached and attached homes, as of January 1, 2022, which was 34% fewer than a month earlier and 42% fewer than a year ago. As a result, all residential properties are drawing multiple offers and as much as $100,000 over the asking price. 

This breakdown of Colorado’s population of 5.89 million was prepared by the state demography office of the Colorado Division of Local Government.

Abrams also showed data for the past five years that indicated that the number of new listings in 2021 was only 4.2% fewer than the average of the previous four years and closings in 2021 were only 4.4% higher than the average of the previous four years, thus the volume of properties bought and sold did not fluctuate significantly in 2021. However, the average closing price in 2021 was 30% higher than the average closing price during the previous four years. Abrams said he does not expect the number of transactions in 2022 to keep up with prior years due to the lack of inventory.

Pointing to the net migration into metro Denver, Abrams said that in 1985, when the population in the 11-county metro Denver area was a little under 2 million, there was one active listing for every 45 housing units. In 2019, “You had to drive by 544 homes before you would see one open-house sign.” He also noted that the average year-over-year appreciation in home prices was 7.5% in metro Denver over the past 30 years, compared with 3% nationally. Clearly, real estate is a great investment, according to Abrams, whether for one’s own home or investment. 

This chart shows the increase in rental prices in metro Denver in 2021 compared to the three previous years.

Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors (NAR), reported that, “The economy is expanding. Eighty percent of the jobs we lost during the first months of the pandemic are back, and the housing market continues to out-perform, with 2021 being the best year for the real estate market since 2006.” 

The main driver for the housing market was the record-low mortgage rate, Evangelou said.  In the first week of 2021, the 30-year fixed mortgage rate was 2.65% compared to the historical average rate of 8%. Since interest rates affect the amount of money people can borrow, millions of people rushed to benefit from these low mortgage rates, pushing up activity in the real estate markets. Pent-up demand and lifestyle shifts during the pandemic also drove the housing market. “People wanted to move to a bigger home so there would be plenty of space for them to work and their kids to play,” she explained. 

This chart illustrates the 3-year inflation rate in Denver and nationally.

Evangelou said she expects a more normal and predictable market ahead, especially with mortgage rates now going up. Already at around 3.5%, she expects them to go even higher, starting in May 2022, to address inflationary pressures. NAR estimates 5.9 million homes will be sold in 2022, which is 10% more than in pre-pandemic 2019. Nationally, as in Colorado, “housing inventories reached record lows in 2021,” she reported, noting, “Housing inventory has not been able to meet housing demands in ten years.”

Looking at the economics, Evangelou pointed out that unlike other goods and services, the supply of houses cannot respond to increased demand quickly since it takes around a year to build a single-family home and several years to plan a development of homes. “According to the data,” she reported, “We have underbuilt for the last decade.” NAR expects inventory from new construction to increase in 2022 to its highest level in at least four years. 

This graph from the National Association of Realtors shows that housing inventory for sale has decreased by nearly half over the past 20 years.

Focusing locally, Evangelou pointed out that the population grew in metro Denver by 420,000 people or 17% in the past decade compared to 7% nationally, with the largest gain (33%) coming in Broomfield. She noted that Denver “remains one of the most popular places for millennials,” as well as people who move from New York and San Francisco. Finally, Evangelou shared that the luxury home market performed the best of all types of homes in the Denver area market in 2021. 

Patty Silverstein, consulting chief economist for Metro Denver Economic Development Corporation and Denver Metro Chamber of Commerce, told DAR members that, since the pandemic began, $9.6 trillion in federal COVID relief funds has found its way into the U.S. economy in the form of direct payments, grants, loans and tax relief. Put into perspective, that amount represents 45% of the 2019 U.S. GDP. “This has had a tremendous influence on the economy,” she pointed out, including the inflation rate, which she expects to slow down this year. Pre-pandemic, the U.S. GDP expanded for 128 consecutive months, then contracted for two months between February and April 2020, Silverstein reported. She expects it to “moderate to 3.5% to 4% (growth) in 2022, compared to the 5.5% to 6% range it grew in 2021.

This breakdown of Colorado’s population of 5.89 million was prepared by the state demography office of the Colorado Division of Local Government.

Colorado has recovered 86% of its jobs lost during the pandemic as of November 2021 and Silverstein expects our state to recover the remaining lost jobs by September 2022. The fastest growth in Colorado has come in the Colorado Springs area with Denver at number two and Pueblo last. 

As a result of market shifts to remote work, the office vacancy rate in metro Denver was 12.5% in the fourth quarter of 2021, compared to a much smaller 5% vacancy rate in industrial space. Retail space “has been amazingly stable,” according to Silverstein, because little retail has been built recently and many retail spaces have been repurposed for entertainment or other purposes. She expects 10 million square feet of additional industrial space to come into the market in 2022.

Elliot Eisenberg, Ph.D. is the former senior economist for the National Association of Home Builders and a nationally acclaimed economist who intersperses humor with data. His company is called GraphsandLaughs, LLC. 

According to Eisenberg, the economy is improving because people are spending large amounts of money, although the government is not, one reason why he, like Silverstein, believes inflation will no longer be a problem by the end of 2022. He pointed to the pent-up demand for cars and light trucks that will result in high sales once the supply of computer chips is resolved. Retail sales overall have been high and will remain high as a result of all the money that went into the economy as COVID relief. 

Eisenberg believes that the significant impacts of COVID will dissipate in 2022 as we learn to deal with Omicron and whatever variants follow it. Consumer behavior, as measured by people going to Las Vegas, has been coming back, as have hotel occupancy rates. Restaurant visits have fallen recently due to Omicron, but he expects them to come back soon, as well. 

Real personal consumption expenditures in 2021, adjusted for inflation, were “above trend” but Eisenberg believes that those numbers will taper off as supplies increase and demand decreases as monetary policy is tightened up to bring down inflation. The small business confidence level is just all right but not great, primarily due to low inventories. The inventory problem, according to Eisenberg, is that the COVID vaccine used in China does not protect well against Omicron, which is putting additional pressure on the supply chain because China makes so many goods and it locks down immediately whenever there is a threat that Omicron could take a foothold. He believes that Omicron will dissipate later this year, resulting in an increase of the supply of goods made in China. 

Corporate profits have skyrocketed as prices have gone up, according to Eisenberg.  GDP is 2% higher than it was before COVID while the cost of labor is 2% less, with most of the benefit going to larger businesses. As a result, firms are buying back their stock to the tune of over $1 trillion during the first ten months of 2021, a rate more than 200% higher than in 2020. In turn, the stock market has been going up, leading some people to retire earlier than they planned and others to leave jobs they don’t enjoy because of their robust 401K assets.

Household balance sheets, including savings, went up while enhanced unemployment benefits and fiscal stimulus checks were being pumped into the economy. Conversely, as that money disappears, Eisenberg expects the economy and inflation to contract. Even if the Build Back Better plan eventually passes in some form, Eisenberg doesn’t believe it will be inflationary, because the new spending is paid for and would occur over ten years. Overall, Eisenberg expects that the real GDP growth, adjusted for inflation, will return to trend, which is around 2%.