With the stock market on a wild ride and the Dow Jones dropping nearly 1,000 points yesterday, it makes some people wonder if the local real estate market might also crash or at least “correct.”
A little history lesson is in order.
Over the last 40 years, the real estate market along the Front Range has averaged 5.5% appreciation per year.
The highest appreciation in one year was 15.9% in 1994.
The lowest ever was -4.0% in 1982.
The last time Wall Street was in turmoil and the stock market was plummeting was 2008. This was, for many reasons, the worst economy of our lifetime.
That year real estate along the Front Range dropped 2.2%.
Meanwhile that year the Dow Jones fell 33.8%.
Bottom line, our market has no history of crashing or even experiencing a major correction.
Why is that?
The answer is fundamentals.
Our local economy has inherent fundamentals that insulate it from big downturns.
We have an incredibly diverse economy which is not reliant upon a single industry. We have all the way from health care, to technology, agriculture, oil and gas, major universities, and financial services (just to name a few).
We are a global destination with a major international airport.
Oh, and the quality of life here isn’t too shabby.
Prices of real estate, just like prices of anything, come down to basic economic principles of supply and demand.
Because of our diverse economy and desirable quality of life, there has been strong, consistent demand for housing along the Front Range.
While there may be little bumps along the way, over the long term our market has proven that it performs.
There is an abundance of great news when it comes to employment in Colorado.
The unemployment rate is incredibly low at 2.7% which is almost a full percentage point lower than the U.S. average.
According to the Bureau of Labor Statistics, Metro Denver added 28,300 jobs over the last year which ranks 15th out of all metropolitan areas nation-wide, many of which have much larger populations than Denver.
While this is positive news, what is even more remarkable is what is happening in the other, smaller cities along the Front Range.
Anytime job growth exceeds 2.0% per year, it is a sign of a very healthy economy.
Here is what the other Cities have seen in terms of job growth over the last 12 months.
• Fort Collins 2.6%
• Greeley 2.5
• Colorado Springs 1.9%