Over 4000 Denver Luxury Homes Sold in the Last Year
Dr. Lawrence Yun, the chief economist for the National Association of Realtors, has talked recently on how high-end home sales are driving up both median and average home prices more than ever before. But, here in metro Denver, in the last 12 months, 4,224 Denver luxury homes have sold for more than $1 million. How does this compare to previous years?
2016—1200 homes sold for > $1 million
2017—1497 homes sold for > $1 million—an increase of 24.7%
2018—1755 homes sold for > $1 million—an increase of 17.2%
2019—2066 homes sold for > $1 million—an increase of 17.7%<
2020—2794 homes sold for > $1 million—an increase of 35.2%<
2021 first half —2314 homes sold for > $1 million—an annualized increase of 162%
What Is Driving The Nationwide Luxury Homes Market?
Oftentimes, trends have sub-trends operating within them. Right now, the strength of real estate has several sub-trends adding to the big upward climb in prices.; The larger and long term trend is the generational bulge that is being caused by the Millennials. And this will likely continue with Generation Z’s who born 1997 forward.
Adding to this, in a very big way, is the current record low interest rates, primarily driven by the Fed pushing rates down in order to deal with the effects of COVID on the economy. Finally, a third factor is the soaring stock market. That aids high end real estate because many buyers on the high end buy with their wealth more so than their income. With the exception of a hiccup caused by COVID, we have had a strong economy for the last 4 years, adding a tail wind to the other factors mentioned above.
Denver Luxury Homes Hedge Inflation
Brian Wesbury is chief economist for First Trust Portfolios, and one of the best economists at “reading the tea leaves” and predicting our economic future as a nation. He recently wrote an article outlining what he expects to see from the huge government spending that continues to take place. To counter the spending, the Fed has increased the money supply by 30%.
According to Mr. Wesbury, the natural consequence of an increased money supply is a matching increase in inflation. He says that prices must and will increase by 30% over time, whether it be 2 years, 4 years or as long as 6 years. Real estate is traditionally one of the best hedges against inflation. It tends to rise in value in times of inflation.
Brian Wesbury explains why real estate will continue to be a great investment despite rising prices. He spoke at Hancock Symposium held at Westminister College in September.
So, whether you are considering the purchase of investment property, your first home or just continue to own the home you are in, you are in a great place to continue earning equity in your financial future. Likely the only way to lose in real estate any time soon is to not own real estate!
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