As 2014 draws to a close, we’ll take a look back at the year, review our 2014 market predictions and assess how accurate they turned out to be. First, let’s set the stage by reviewing the market data for November.
The total volume of real estate sold in November across the Front Range markets increased 8.5% compared to November last year. The market remained more active than typical at this time of year.
As a result, the supply of inventory also remained tight at 2.2 months. For reference, last year at this time, the supply was 2.9 months.
The numbers from November are the latest evidence that the market is finishing the year on an upward trend. In the spirit of transparency and accountability, let’s review the predictions for 2014 that we made a year ago in the December 2013 version of this newsletter:
Prediction #1 – Sellers’ Market Rolls On in 2014
“The supply of inventory will remain tight, giving sellers the upper hand as buyers compete for a limited supply of move-in ready, market priced listings. Inventory levels will remain below the six month benchmark that divides a sellers’ market from a buyers’ market.”
Reality – Inventory has become even tighter in 2014. We started the year at 2.8 months of supply along the Front Range. In March, the supply fell to 2.2 months as sales outpaced new listings. Inventory remained at 2.2 months through the summer and that’s where we sit today.
So it’s the same old story- a lack of good listings continues to hold back sales and put upward pressure on prices. The market continues to favor sellers. In fact, the conventional wisdom to wait until spring to list may not apply this year due to a dearth of listings and plentiful buyers eager to purchase before any potential interest rate hike.
Grade – A. This prediction was spot on.
Prediction #2 – More Buyers Drive up Demand
“2014 job growth in Colorado will be robust and widespread …folks who have jobs, or are relocating for new jobs, buy houses…The end result will be gains of 5% to 10% in the volume of real estate sold in 2014 compared to 2013.”
Reality – Through the end of November, sales volume across all Front Range markets was up 2.8% year to date compared to 2013, lower than the 5% to 10% increase we predicted.
Fortunately, the job growth happened. However, the lack of inventory held back sales as too many buyers chased too few listings. A lack of good listings may be suppressing the number of sales by as much as 10%. Ready, willing and able buyers simply cannot find homes to purchase.
Grade – B minus. Volume increased, but not quite 5%.
Prediction #3 – Home Values Up 4% to 6%
“The conditions of low supply and high demand that drive up prices are firmly in place. However, prices will only increase about half as fast they did in 2013. This is a welcome moderation.”
Reality – Home values have increased 6.96% in Colorado according to the latest Federal Housing Finance Agency (FHFA) report. The Core Logic Home Price Index pegs Colorado appreciation at 8.6%. In Boulder County, homes values are up 8.35% according to FHFA.
Although lower than actual 2014 appreciation, our prediction of 4% to 6% was quite bullish at the time. The headlines were talking about a housing slow down and many so-called experts were predicting much lower appreciation rates. Zillow, for example, predicted annual 2014 appreciation of 1.8%, and then revised upward to 3.8% at mid-year, which still ended up well short of the mark.
A final note not to be overlooked- Colorado home prices are at all time highs.
Grade – B plus. Better than most, but still a bit low.
Our overall prediction for 2014 was: “market solid as recovery enters expansion phase.” And that’s exactly what transpired. So we will gladly take a cumulative grade of A minus for our 2014 predictions. Like the market, that’s solid!
Next month, we’ll make our market predictions for 2015. Sneak peek – more of the same.
In the mean time, I hope you and yours have a wonderful Holiday Season!