The real estate climate, both nationally and locally, likely reminds us of Denver’s typically expected, pleasant, weather; mostly sunny, an occasionally cloudy day, and the possibility of temperatures heating up in the summer, and also freezing-up a little in the winter months.
The national Case-Shiller index released year to date (YTD) figures at the end of November for Denver, indicating real estate prices are up 6.2% from one year ago. Case-Shiller tracked prices from 20 metro cities and compared those prices to January of 2000. The Denver metro area was 56.6% higher than 1/2000, which includes the recession timeframe from 9/08 until the fall of 2011. Only Dallas, Las Vegas (which had plummeted), Portland, and San Francisco showed annual appreciation rates higher than Denver. Early predictions for the U.S., as it relates to price appreciation for 2015, range from Zillow’s suggested 3-8% appreciation, Forbes’ 7% forecasted increase, and Fannie Mae and NAR’s (National Association of Realtors) consistently forecasted 8% appreciation.
Variables impacting home prices, and the number of homes sold, will be driven by low interest rates, lower than normal inventory of available homes (which will improve slightly), continued job growth, tight lending guidelines easing up, new homes being built, pent-up demand, and changing household formations that are impacting our housing demographics.
While these outlooks look good, keep in mind the following factors that often determine the seasonality of real estate.
Don’t get lulled to sleep by low interest rates. Low interest rates make a large difference in determining what you can afford, and they will likely linger in the 4%-4.75% range in 2015.
Job growth is good and steady, with Denver near the best at 4.3%.
Buyers have been beaten into assuming they can’t qualify for a loan. You do need to be credit worthy, but take the time to get pre-qualified and at least learn what you can do to be approved.
Nationally, the construction industry will build 1 million homes this year, the majority are apartments (440,000 for sale homes) and 1.3 million in 2015 (620,000 homes). Normal production (prior to 2008) was 1.5 million per year.
New and changing household formations have created strong desires and needs, influencing our country’s demographics. The Baby Boomers are quickly becoming empty nesters looking for a lifestyle change to smaller more efficient homes, closer to urban settings or near their grandchildren (even relocating to different cities). Millenials entering their mid 20s and early 30s are starting to buy their first homes. The historical average age of a first time buyer has been 32. As the employment picture improves, they will be moving out of their parents basements, and seeking traditional and economic opportunities of home buying. According to NAR, 32% of all real estate purchases were by singles in 2013. Over most of the last four decades, the first time buyer market made up 34% – 40% of all home sales. Since the recession, that number has dropped to roughly 26% – 28%, with 2014 percentages expected to reach 28% – 29%. That number will climb over 30% in the near future. And, much of our senior population, along with some older Baby Boomers, will transition into beautiful retirement communities and buildings.
The real estate market is optimistically poised to enjoy Colorado’s good weather.
Fuller Sotheby’s International Realty, the exclusive Board of Regent for the Who’s Who in Luxury Real Estate, has 10 office locations in the Denver Metro and surrounding areas, including Boulder, Castle Pines Village, Cherry Creek, Clayton Street, Denver Tech Center, Downtown Denver, Evergreen and the resort communities of Breckenridge and the Vail Valley.
For more information contact Steve Blank at 303.520.5558. To service all of your real estate needs visit www.fullersothebysrealty.com.