“The U.S. economy will run strong for two more quarters before peaking this summer and sliding into a mild recession early next year”, predicted economist Alan Beaulieu, a specialist in long-term economic cycles. Fortunately, Colorado should hold up better than most states during the coming slowdown but impacts will be felt.
What does this mean for Colorado Real Estate?
Most economist are predicting some change in the next 12-18 months as the economy continues gaining steam and interest rates begin to tick up. But Beaulieu said the metro Denver housing market has overshot the mark and price gains will level off. Higher living costs will also complicate the search for workers.
In a prior article, is housing bubble 2 on horizon, I showed why Denver would keep on ticking along. Unfortunately, this doesn’t mean that Denver gets a golden ticket for growth into perpetuity. Eventually Denver succumbs to various market forces impacting other areas of the country.
Denver and the front range real estate impacts the entire state.
What happens in the Denver metro area always trickles out to other areas. Some areas have a higher correlation (for example the suburbs of Denver) while others are only moderately impacted (think Aspen) so it is important to watch the front range real estate market to see what will happen throughout the state.
What does this mean?
The economist Alan Beulieu is predicting a mild recession (basically a hiccup) with a much larger correction on the way 10 years later. I’m not sure it is possible to predict the extent of a recession prior to the event. There are countless variables that will drastically change the outcome.
For example, in our current environment the federal reserve is hinting at up to 4 rate hikes this year. This would drastically raise borrowing costs and likely tip us into a recession in the next 18 months. If the fed is even more aggressive fighting the “imaginary inflation” that has yet to surface the effects on the economy could be even more interesting.
What should you do?
No, I’m not crazy! I know in the last article, is housing bubble 2 on horizon, I showed why Denver is faring better than the majority of other cities and will continue to do so. But this advantage doesn’t last forever. The economic cycle will happen in Denver as well and filter out to the rest of the state. It is impossible to predict when a recession will hit (until you are actually in it) and the depth of the correction. The economy and real estate moves in cycles. We are undisputedly near the end of the cycle. This is when economic activity starts to peak before the next wave. Now is the time to make sure your personal and business balance sheet looks clean, so you have flexibility to ride through the next cycle whatever and whenever it may be.
Additional Reading/Links/Resources
