Hot Topic – The housing recovery. Will history repeat? Steve Blank, managing broker of Fuller Sotheby’s International Realty’s downtown Denver office, weighs in.
Once again, the real estate market has become a subject that nearly everyone is interested in talking about. It might just be simple curiosity – visiting open houses or spending time exploring homes and neighborhoods on the Internet. More sellers are serious about becoming buyers again, while current tenants have developed a desire to invest in a home. In fact, that first-time homebuyer market comprises 27%-29% of all sales.
Another changing trend is the length of time homeowners live in their homes. From the 1970s-1990s, people remained in their homes an average of 5-6 years. Over the past 10 years, the trend for families remaining in their homes has increased to 8-9 years. Consequently, family circumstances (marriage, divorce, babies, seniors, empty nesters, etc.) have created higher levels of pent-up desire and demand. So how does this relate to the Denver housing market? Steve Blank, managing broker of Fuller Sotheby’s International Realty’s downtown Denver office, weighs in.
“Denver is one of the leading real estate cities in this post-recession economy. Recent reports indicate year over year gains in all 300 top markets across the nation, with 87 of those cities making a 100% rebound or better. According to the National Association of Realtors, there were 5.09 million sales across the country, up 9.1% higher than in 2012, making it the strongest performance since 2006,” says Blank. “In December, there was a 4.6 month supply of homes available (nationally), suggesting a balanced market, while Denver barely had a two-month supply of available homes, representing more of a seller’s market.”
One reason for the turnaround is the dramatically lower number of distressed sales (foreclosures and short sales). These type of sales accounted for only 14% of all sales in December, which is down from 24% in 2012, but down from nearly 40% in 2010. In Colorado, foreclosures numbered 9,652, down from 16,232 in 2012. Denver made up nearly half of the state’s foreclosures in 2013, but was down 46% from 2012. Multi-list reported nearly 43,000 single-family detached homes sold last year in metro Denver, eclipsing the all-time record set in 2004 of just under 42,000. Condo and townhome sales increased 23% over 2012.
STEVE BLANK SUGGESTS A FEW TRENDS TO WATCH FOR IN 2014
BETTER INVENTORY LEVELS | More people will be able to get their lives off hold and will place their homes on the market, taking advantage of their newly discovered equity due to value increases. This means inventory levels will also rise, creating a balanced market that will better meet the demand.
LESS FIX AND FLIPS | With significant fewer distressed property sales, there will be far less flipped houses entering the market. Those looking to compete in that business are finding fewer opportunities and will need to do more “in-depth” renovations.
NEW HOME SALES | These will increase a good 20%, offering even more options for buyers coming into the market.
MORTGAGE RATES | Although rates are still historically low, expect them to climb into the 5%-5.5% range by the 4th quarter.
WILL CREDIT BE ANY EASIER | Yes and No (I’m not proud of that answer). With the refinance business dwindling, lenders are looking to fill the void with new purchase-money loans. Some lending practices will ease up for the portfolio lenders (not selling their loans to the secondary market); however as of January 10, 2014, new federal lending standards have created tougher guidelines and will be looking deeper into the borrower’s ability to repay a loan.
LOTS OF CONSTRUCTION | The activity in Denver is proudly quite high at this time. However, it’s interesting that thousands of apartments are being built (likely to be converted into condos down the road) while in contrast, much fewer homes are coming out of the ground for sale.
Central and Downtown Denver leading the way. As reported by Denverinfill.com, four projects (927 units) have started construction since September, resulting in more than 4,400 units currently under construction. There are another 10 projects with nearly 3,000 units, either underway or proposed in the city.
If you are interested in discussing real estate opportunities with Steve Blank, call 303.520.5558. Fuller Sotheby’s International Realty has multiple office locations in the Denver metro area, including Downtown, Cherry Creek, Greenwood Village, Boulder, Evergreen, Castle Pines, Breckenridge and the Vail Valley. More information available at fullersothebysrealty.com.