The answer in short is neither. Since 2024, we have seen a market we would normally call a transitional market between the past seller market and a future buyer market. This transition is lasting longer than expected and has been unpredictable. It seems more like a reset than a transition. Let’s take a deep dive and look at the market in 2025 and expectations for 2026.
Pricing Favor: Toss Up
There have been slight declines in prices year over year in Colorado for the areas I serve, the metropolitan Denver Area and Summit and Park Counties. The current metro Denver median price sits at $585,000 down from $599,990 in January 2025, a drop of 2.5%. The current Summit County median price sits at $865,000, down from $1,127,500 in January 2025, a drop of 23.3%.
Pricing is a toss-up on favorability. The reality for sellers across all price points, with an “average” home, is the market most often favors the buyer. This average home may be like others in the area, it may not be turnkey for a buyer, it may be lacking amenities and finishes buyers are looking for, it may have deferred maintenance or need significant improvements. For buyers, these homes provide an opportunity for those willing to accept a property that may need work or may not be as turnkey as they would like or in the location they would prefer. Sellers will more likely introduce price reductions, if not priced correctly at the outset, in order to attract a buyer. The seller may also be open to entertaining the provision of concessions to a buyer. These scenarios favor buyers and are putting downward pressure on prices.
For sellers with exceptional property, again immaterial to price, the market favors sellers. If the property being sold is a standout property, unique in location, unique in architecture, design, is turnkey, with the amenities, features and finishes buyers are seeking and most likely to check most if not all “boxes” of a buyer you are likely to attract an offer in short order. Buyers, if you find the perfect home while looking at homes, don’t make the mistake of waiting for your decision. Buyers need to act quickly on these homes. If the home is priced correctly, buyers need to be prepared to offer a price at the list price or something very close to it. These homes are putting upward pressure on prices.
Inventory Favor: Buyer
When looking at inventory this is a much simpler metric to measure. Inventory across all price points and all property types is increasing. With increasing inventory it offers buyers more choice and therefore sellers have to be competitive with their neighbors or sellers with similar properties. If this alone was the only factor inventory is moving towards or in some cases already at a level that favors buyers.
Interest Rate Favor: Toss Up
Interest rates continue to have some drag on the housing market even in light of improvement in 30-year mortgage rates dropping into the low 6s. The market continues to see anxious sellers with lower mortgage rates on their current that have tired waiting for rates to drop. As rates have dropped some sellers see the opportunity to market and sell their home now. This has helped contribute to the rising inventory levels witnessed over the last few years
For buyers, many, especially younger, less experienced buyers without the history of mortgage interest rates are still worried that interest rates, even in the low 6s are too high. Many buyers are still waiting for rates to drop further before they enter the market to make a purchase. While other buyers are moving forward and using available tools and strategies to help ease their nerves with interest rates and the resulting monthly payment.
Historically, the average interest rate for 30-year fixed mortgage stands at 7.7% and have fluctuated from a peak in 1981 of 18.63% to a low of 2.65% in 2021 as tracked by Freddie Mac since 1971.
Affordability Favor: Toss Up
Affordability is a tough one to break down. When buyers and sellers look at affordability, they typically look at it through the lens of interest rate and price which has already been discussed. For both buyers and sellers, affordability can be concerning. For sellers it is not a concern when selling and works in their favor with current market conditions with prices still near the peak. Affordability for buyers, if they are asked, generally is not favorable. Some perspective when deciding may be helpful. From the US Census Bureau, from 1940 to 1970 real wage growth was greater than 100% driven in large part by significant technological advances, increased capital investment and improved business methods boosting worker output. Strong union member participation and collective bargaining for its members was another significant factor.
From 1970 to 2015, real wage growth clocked in at around 12%. A significant slowdown in technological progress and productivity growth after 1970, coupled with increased global competition (offshoring of jobs) and skill-based technological change (automation) placed downward pressure on wages. Additionally, a declining proportion of union workers and the collective bargaining they had over wage increases, as well as an increase in employer non-compete clauses further weakening the position of workers.
During this same period of time from 1940 to 2000, the average price of homes quadrupled. The median home price as measured in 2000 dollars was $30,600 while in 2000 the median price was $119,600. Prices increases adjusted for inflation between 1950 and 2010 was over 230% with particularly large increases in the late 1940s, during the 1970s and from 1990 to 2006.
In the late 1940s the economy was booming after WWII as the US entered peacetime prosperity. In the 1970s the US economy struggled with stagflation (high unemployment and stagnant GDP growth and high inflation. This combination was fueled by two major oil crises and the collapse of the monetary policies brought about by the Bretton Woods conference. Interesting to know that this period led to high mortgage interest rates that peaked in 1981.
From 1990 to 2006, the US economy boomed with the longest economic expansion on record fueled by accelerated productivity growth from investments in IT, low inflation, and falling unemployment and ending with the dot-com bubble burst and mild recession in 2001. This brief recession was followed again by a period of economic recovery and resilience. Globalization and increasing trade deficits and government debt along with shifts in government and health care generating most new employment in the latter half of the 1990 – 2006 period contributed to a slowdown linked to the end of the housing boom and rising energy costs.
Since 2006, there was the Great Recession and the subsequent slow and long recovery that was brought on by the housing bubble collapse prompting massive government intervention across multiple industries from banking to automotive. This was followed by a period of moderate economic growth, a tightening labor market and low inflation.
The advice I can offer is that there will be ups and downs in our economy as has just been laid out, wages are not stagnant and they keep growing, the US economy has been struggling with righting the ship. Nominal wage growth over the last four years has outpaced historical averages however, coupled with the high inflation brought about by post-COVID pandemic monetary policies, real inflation adjusted wage growth has been mixed with cumulative real earnings slightly declining since January 2021.
What Is in Store For 2026
Interest rates will most likely remain in the range of 6 -6.3% with a possibility they could be in the high 5s by the end of 2026 dependent on if the overall disinflationary trend continues and if the Federal Reserve eases its monetary policies. Inflation is expected to be 2.4 – 3.3% even as the overall disinflation is continued to be expected. Real wage growth will remain slow due to the overall persistent inflation expectations in light of expected wage growth of 3.5%.
Persistent inflation will be primarily driven by sticky service sector pricing (pricing resistance to declines despite changes in market conditions, e.g. labor cost/wages, long-term contracts (e.g. rental housing)), medical services between providers and third-party payers). Additionally, the full effect of tariffs on consumer goods imported to the US, expansionary fiscal policies and structural labor market constraints from housing shortages and low labor force participation will all be worthy of keeping an eye on.
2026 should be a promising year for residential real estate in Colorado. It is expected to be better than 2024 and 2025 as some of consumer's concerns ease. If you are looking to purchase or sell in 2026, I invite you to consult with me early and often to develop a plan and strategy for your success in 2026.
