Ready to Make Your Move?December Quick Stats
Denver Metro Single Family Housing Stats:
Active Listings: 6,366
- Down 28% from Dec. ‘11
Under Contract: 2,442
- Up 8% from Dec. ‘11
Sold: 2,725
- Up 8% from Dec. ‘11
Average Price: $315,451
- Up 14% from Dec. ‘11
Average Days on Market: 75
- Down 30% from Dec. ‘11
Denver Metro Condo Housing Stats:
Active Listings: 1,340
- Down 37% from Dec. ‘11
Under Contract: 648
- Up 12% from Dec. ’11
Sold: 675
- Up 8% from Dec. ‘11
Average Price: $186,877
- Up 12% from Dec. ‘11
Average Days on Market: 67
- Down 37% from Dec. ‘11
Real Estate News
Happy New Year! Now that the holidays are over it’s the perfect time to talk about what I think the real estate market will look like in 2013. So let’s jump right in.
Average Home Price: The average price of a home in Denver leapt 14% in 2012, surpassing even the most optimistic forecasts (including my own!). I believe this year will be almost as strong with an average price increase of 8-10% and here’s why: The number one driver of home price change is the amount of inventory on the market. In 2007 we had a peak of 27,500 properties on the market and prices dropped 14%, while in 2012 we averaged 10,000 properties on the market and prices went up 14%.
For the past 10 months we have had the same record low inventory in metro Denver with absolutely no sign of it increasing. Until it does, there will continue to be tremendous upward pressure on prices simply because demand is outstripping supply. Where will the new supply of home inventory come from? It won’t be bank-owned properties and short sales. After five long years our economy is finally recovering and a better economy means fewer distressed properties. The additional supply will eventually come from home owners who finally realize what a great market it is and decide to put their home up for sale. When this will happen is anyone’s guess. We’ve seen very little evidence of home owners making this realization so far, as evidenced by the continued lack of inventory on the market. Sooner or later, the fact that it’s such a tremendous seller’s market has to become more widely known and that’s when the number of sellers will increase. But this might take another 6-12 more months which is why demand will continue to outstrip supply in 2013 and prices will continue to rise.
Number of Homes Sold: Simple economics again. When demand outstrips supply it pushes the market up, which is why there were 7.66% more home sales in metro Denver in 2012 than 2011. And the only reason why there weren’t even more home sales in 2012 was because there was so little inventory to sell!
At some point this year I do expect sellers to begin putting more properties on the market because of the tremendous demand and they will get sold quickly. But I don’t expect equilibrium in the market until 2014. The demand will continue to be so strong for the foreseeable future I think the number of homes sold in 2013 will go up 10-12%.
The Condo Market: Incredibly enough the condo market did just as well as the single-family home market in 2012! Prices were up 10%, inventory was down 37% and it’s still a blistering hot market. Just like the single-family home market, I don’t see any evidence that would lead me to believe this will change any time soon. The inventory has been at rock bottom for 10 months and until more condo inventory comes on the market, prices will continue to rise. I believe this is the year condo prices will surpass the highs of 2006 and 2007, the previous market peak.
The Investor Market: I think the real estate investor market this year will look very similar to last year. The fix and flip market will be strong for those who can find underpriced homes to buy and repair. They’re out there but it takes tools, patience, and work to find them. Once you get one fixed up, selling is the easy part because of the lack of competing inventory.
I think the buy and hold market will continue to be extremely generous to long-term investors. Interest rates and vacancy rates are still at record lows and rents continue to rise. It’s not difficult to buy a rental property in today’s environment and put it on the path to be paid off in 12-15 years. It’s tough to beat rental property ownership for building long-term wealth. That’s the one thing that never changes.
Charts
Here are the two most important charts to understand our real estate market. The first shows how the number of homes sold increased in 2012; the second shows how prices skyrocketed in 2012.
