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With 2023 in the rearview mirror and the official appreciation for 2023 rolling out around 3-5%, it’s now time to look forward and talk about what Denver’s real estate market has in store for us in 2024. It’s no surprise the big talk of 2023 was the high interest rates that ranged from the high 6’s at best to many borrowers settling in the low 8’s. These higher interest rates played a major role when it came to the year’s appreciation and set the tone early on for a slower paced real estate market. So, it’s no surprise that, already in 2024, interest rates continue to be a major talking point when it comes to market predictions for the upcoming year.

If you study recent Fed meeting minutes, the common trend is rate cuts throughout 2024, with many statements saying anywhere from 3-6 cuts. These conversations have created a lot of buzz around the real estate world and stock market, with high expectations of appreciation for 2024. The appreciation would be fueled by lowering interest rates, allowing buyers to afford a higher loan balance with a lower monthly payment. I have seen many resources state that lower interest rates would reintroduce several million buyers nationally back in the real estate market. In the event that this is what happens, due to still historically low inventory levels, we would without question see values quickly jump across Colorado. The multiple offers all well over list price would surely return similar to what we saw in 2020, 2021 and early 2022. This is the storyline most in the real estate industry are currently sharing across social media platforms everywhere: “Buy now before the rush and lower interest rates and enjoy huge appreciation vs. paying for it later.”

However, it is my opinion that the market will move at a much slower pace than these Instagram Reels or TikToks are making you believe. The reason for this, not shockingly, is interest rates. Interest rates were increased very quickly over the past year and half, often with multiple increases a quarter ranging from .25% to .50% at a time. I believe many are expecting to see the same level of aggression with the interest rate cuts as they did with the increases. Although this would be a welcomed relief from the high interest rate market we are starting the year with, I think it’s more realistic that we will see a very slow and gradual cut in rates.

The original reason the Feds increased rates was to combat out of control inflation, and the higher interest rates have shown to slow inflation to more sustainable numbers. Because of this, the Feds are most likely going to initially cut rates at a slower rate to allow time to see how the markets, including real estate, respond to the lower rates. This would bring mortgage interest rates down slightly, but we might not see a huge decrease in rates for some months to come, leaving buyers with the choice of not purchasing or buying with higher interest rates, likely in that 7% range. These still higher interest rates would continue to leave many homebuyers on the sidelines, keeping values relatively flat or similar to 2023.

Non-industry experts predict we will see mortgage rates for 2024 stay in the 7% range for the first part of the year, go down slightly more the second half and end the year in that mid 6% range. Although rates in the 6’s would be welcomed and easier to manage than an 8% rate, they might not be the lower rate that many buyers are holding off for. This would help reduce the chances for unsustainable and unhealthy double-digit appreciation and a similar market to 2020, 2021 and the beginning of 2022.

After reviewing the many predictions for the Feds interest rate plans, predicted mortgage rates, and studying previous markets, my official prediction for 2024 is that we will see a slower start to the real estate market than previous years. Then, as rates settle in below 7% for the remainder of the year and buyers accept that rates are not going to be going as low as they were hoping, buyers will either decide to jump in the market or put buying a home off for another year. This will cause the second half of the year to be busier than it started and could provide a good opportunity for solid appreciation until the regular fall and winter seasonal cool off. I predict that the year-end appreciation for 2024 will be slightly higher than we saw in 2023, and we will end the year around 5-8%.

Of course, this prediction is based off my study of the Denver real estate market, my involvement in real estate transactions across the Denver metro area and just an overall feel for what we’re seeing with local sellers and buyers. I do not have a crystal ball, so be sure to join us on the first Thursday of every month in 2024 for an in-depth and real-time market update to see exactly what happens in Denver’s real estate market in 2024.

Regardless of what happens with the market in 2024, the TK Homes Team is looking forward to continuing to be a resource for Denver area homeowners, home sellers, homebuyers and real estate investors. We look forward to serving you throughout 2024!

~ Written by CEO/REALTOR® Trevor Kohlhepp