December Update: As Predicted, Recovery Rolls On in 2014



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!


November Market Update: Fall Sales Not Falling

Normally, the market slows in the fall as the leaves and the temperatures drop. This fall, however, the market has been unusually active, defying the standard seasonal pattern. Sales volumes are actually remaining steady, if not increasing.


Specifically, the volume of real estate sold across all Front Range markets in October increased 0.1% compared to September’s volume, and was up 11.4% on a year-over-year basis. Sales remained steady, but the number of new listings followed the typical seasonal pattern and fell 8%. Fewer listings and steady sales resulted in a drop in the inventory from 2.3 months to 2.1 months, reversing the four-month trend of rising inventory levels.


In Boulder County, sales volume increased 2.6% on a year-over-year basis in October, and the number of sales in the month was just four transactions shy of September’s number. The supply of available homes fell from 3.2 months to 2.9 months.

inventoryNOVLooking ahead, the market’s strong performance in October should continue through the end of the year based on a few leading indicators. First, the number of listings placed under contract in October was up 10% over last year. These under contracts are November and December’s closings.


Second, home sales have been trending up this fall on a national basis. The NAR Pending Home Sales Index, a forward looking indicator based on contract signings, has been rising since the summer and has been above 100 for five consecutive months. (100 is equal to an average level of contract activity)


One more metric that gives us a peek even further into the future is foot traffic – the number of buyers actually touring listings and looking at them for purchase. This is the time of year that foot traffic would normally level off and start to drop. We’re actually seeing the exact opposite. The national Foot Traffic Index published by NAR Research and Sentrilock is skyrocketing. The Index jumped 8.7 points to 65.7 in September, the third consecutive monthly increase.


More and more buyers appear to be staying active or coming into the market this fall. On a macro level, the reasons for the increase in demand can be found in the positive economic news of late, from lower jobless claims to higher job openings to an increase in consumer confidence.


However, something that is not receiving much press, but is certainly impacting the housing market, is the fact that it’s getting easier to secure a mortgage, not harder. According to the Mortgage Bankers Association, the average FICO score of a buyer who purchased a home with a conventional mortgage in September was 755, 4 points lower than the average score in 2013, and 9 points lower than the average in 2012. Of course, we haven’t returned to the bubble days of recklessly easy credit, but the trend for the past two years has been an increase in credit availability, and this is slowly helping first-time buyers enter the market.


Back in the July edition of this newsletter, when many national real estate sites and pundits were talking about a slow down in housing, we predicted “the second half of 2014 looks like it will be quite strong.” We are thankful that our prediction appears to be correct, and we are thankful that you are one of our readers.


Happy Thanksgiving.

Time for Millennials to Get in the Game

The market posted better numbers than expected in September, perhaps the start of a strong finish for 2014. Overall, we continued the slow transition to a “no drama” market. The window for first-time buyers to join the ranks of homeowners, and thereby change the trajectory of their life, remains wide open. More on the benefits of home ownership after a quick look at the data.
The volume of real estate sold across all Front Range markets in September of 2014 was 8.9% higher than September of 2013. The inventory of homes for sale increased to 2.3 months, continuing the glacial return to a more balanced inventory level of 5 to 7 months.    
In Boulder County, sales volume increased 11.9% on a year-over-year basis in September. The supply of available homes in Boulder County increased to 3.2 months.
salesvolumefrontrangeOCT2014The trend of increasing inventory is giving buyers a few more choices and just a bit more leverage to negotiate price this autumn. Many first-time buyers are seizing the opportunity and becoming homeowners. That said, an even greater number appear to be sitting on the sidelines, scared away by tales of not being able to secure a mortgage, or still jaded by the housing downturn and waiting for another price correction. And waiting could prove to be a mistake for the Millennials, the generation aged 18 to 33. Why a mistake? Because those who choose the path of homeownership are putting themselves on a fundamentally different trajectory in life than those who choose to remain renters.
A survey of Consumer Finances conducted by the Federal Reserve every three years was updated in September. Some of the findings revealed in the report:

  • The average homeowner has a net worth of $194,500
  • The average net worth of a renter is $5,400
  • A homeowner’s net worth is over 36 times greater than that of a renter
It’s important to note that the survey results include any drop in net worth due the housing correction of 2006. However, those who are skeptical might argue that the logic of this survey is somewhat circular, in that those who can afford to purchase a home are not surprisingly going to have a higher net worth. 
The counter to this argument is that the average American family, including both homeowners and renters, has a net worth of $81,200, and of that net worth, 61.4%, is in home equity. Conclusion: those who can scrape together a down payment (through savings, an assistance program, help from family, or all of the above) and make a purchase will start building their net worth, and those who remain renters will be shut out of that “61.4%” in upside potential.
This may not be the perfect time for Millennials, or anyone else for that matter, to buy, but it’s also clearly not a bad time to buy. Timing the market is difficult, if not impossible. The great news is that in real estate, markets move slow and as a result, you don’t need to have perfect timing. You just need to get in the game. When we look back a decade or two from now, we’ll probably find that the first-time buyers who got in the game during the housing recovery and low interest rates of this period set themselves up pretty well. The American dream of homeownership is alive and well, and still provides a path to prosperity.

Market Update: Buyer/Seller Disconnect

salesvolumefrontrangeSEP1There seems to be a growing disconnect in our market between buyers and sellers. Buyers are still out in force but remain cautious and choosy, and sellers have been slower to adjust to a market that is moderating and less frenzied.


Unable to build on the momentum of June and July, the pace of sales dropped in August. Of course, a seasonal slowdown in August is typical as the summer selling season comes to an end, but this pull back was more pronounced than usual this year.


The volume of real estate sold across all Front Range markets in August decreased 1.1% compared to August 2013, and was down 10.1% on a month-over-month basis. The inventory of homes for sale was unchanged at 2.1 months.



No doubt, a shortage of listings continues to hamper the market. The inventory supply remains well below the six-month benchmark that indicates a balanced market favoring neither sellers nor buyers. Nothing new there.


What’s new is what appears to be a growing disconnect between buyers and sellers. Today’s buyers are extremely selective. Despite the shortage of properties for sale, a listing that is not priced well or is not move-in ready will probably languish on the market, even while other listings sell in days, if not hours.


The underlying cause is a difference in expectations between buyers and sellers. Specifically, some sellers are not willing or are not able to make the repairs or improvements needed to bring their home up to the top notch showing condition today’s buyers are expecting and demanding.


These sellers think because the market is a sellers’ market, they can “get away” with foregoing repairs and updates, and that these blemishes will be ignored in the frenzy. In some markets, they would be right, but not in today’s market.

A similar disconnect between buyers and sellers is occurring in the area of price. Sellers who witnessed the frenzied market in the first half of the year may understandably think those rapid price increases will continue indefinitely. As a result, many want to test the market and price aggressively.

So rather than pricing at today’s values, they “forward” price at what values will be a few months from now if price increases continue. In a market that is moving up rapidly, this is not a bad strategy.

However, in a moderating market in which prices are increasing but at a slower rate, forward pricing creates a disconnect with buyers. Sellers need to price for the market we have today, which by the way is still a strong sellers’ market at all- time record high home values.

Overall, it’s not a huge surprise that buyers have been quicker to adjust to our moderating market than sellers. As a seller, who wouldn’t want the frenzy of multiple offers and bidding wars that result in price jumps of 5 or 10%? That’s still possible in this tight inventory market, but not nearly as prevalent as it was 4 months ago, and only if the list price and showing condition are both attractive to buyers.


As stated in last month’s newsletter, we are slowly trending back to a “no drama” market. A balanced market with inventory levels of 5 to 7 months and historical price appreciation of 3% to 5% is good for both buyers and sellers. That said, there will be a few disconnects between buyers and sellers along the way that will take a month or two to sort out.


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2014 Mid-Year Market Update: How Are Our Predictions Faring?


As we look back at the first half of 2014, we find few surprises in how the market performed. This month, we will compare actual year-to-date market performance with our 2014 predictions and look ahead to what we can expect in the second half of the year.


But first, a quick review of the June market data.


The volume of real estate sold across all Front Range markets in June increased 6.3% compared to last June, the largest year-over-year gain this year, signaling an uptick in sales activity.


The supply of inventory remained tight at 2.0 months, indicating a market that continues to favor sellers.


In Boulder County, the volume of real estate sold in June decreased on a year-over-year basis, dropping 4.1% compared to June 2013, but was up 14.6% month-over-month.



The supply of inventory is a scant 2.8 months. A lack of listings continues to choke the market.


Now let’s compare our predictions made at the outset of 2014 with the actual year-to-date numbers through June.


Our predictions for 2014:


#1. Sellers’ Market Rolls On

“The supply of inventory will remain tight. Inventory levels will remain below the six month benchmark.”


Mid-Year Update: Unfortunately, this prediction has proven all too accurate. In fact, inventory levels have  fallen even lower. We dubbed 2014 the “Year of the Move-up Buyer”, and while many home owners have realized now is a great time to sell and purchase another home, not enough of them have pulled the trigger to satisfy the seemingly insatiable demand of buyers for new listings.


Looking ahead, there does not appear to be anything on the horizon that will alter this dynamic in the second half of the year, and inventory levels will remain low.


#2. More Buyers Drive Up Demand

“Demand for housing is driven by two primary factors: jobs and interest rates. Positive signs in each area will result in gains of 5% to 10% in the volume of real estate sold in 2014.”


Mid-Year Update: The good news is that Colorado is experiencing job growth. Unemployment in the state fell to 5.5% in June, the lowest it’s been since October 2008.


A bit of a pleasant surprise has been that interest rates have stayed low in 2014. In fact, rates today are less than they were a year ago and have remained in a relatively tight band of 4% to 4.5% this year.


Unfortunately, the lack of available inventory has not been able to meet the demand created by job growth and low interest rates. As a result, the market has only been able to squeak out a paltry 0.7% increase in volume year-to-date compared to the first half of 2013.


June’s year-over-year gain of 6.3% could be the start of a trend, but even with a strong showing in the remaining six months of 2014, we will probably finish the year with a 0% to 5% increase in volume.


However, it’s important to put that figure in context. This means 2014 could set an all time record for volume of real estate sold along the Front Range, finally topping the volumes seen in the previous peak in 2006.


#3. Home Values Up 4% to 6%

“Low supply and high demand will drive up prices, but only about half as fast they rose in 2013.”


Mid-Year Update: According to the most recent Federal Housing Finance Agency (FHFA) report, Colorado home prices have appreciated 9.3% in the last year, so that’s a bit of a surprise to the upside.


For the second half of the year, home price gains could moderate a bit, but national forecasters have been saying this for well over a year a now. Zillow predicted that Front Range home prices would increase 1.8% in 2014. Gains will clearly be higher, extending Zillow’s streak of being wrong to a second consecutive year. When 2014 comes to a close, it now appears that home values will be up 5% to 10%.


Overall, the second half of 2014 looks like it will be quite strong as our steady “tortoise” market leaves the boom- and- bust “hare” markets like Phoenix behind…once again. Here’s to a great second half of the year!
This article is a compilation of the insights of 8z Realtors written by Lane Hornung, 8z CEO.

8z Real Estate Recognized as “Mercury 100″ Company

8z Real Estate was recognized in BizWest magazine’s “Mercury 100″ as one of Boulder County’s 100 fastest growing companies.  8z ranked 21st of the Boulder county businesses by revenue, and has had 77% growth from 2011 to 2013.




The Mercury 100 was announced on May 22nd at the Omni Interlocken Hotel in Broomfield.  The companies were announced using Twitter on large screens during the event, revealing the companies from 100th to 1st.  8z Real Estate founder Lane Hornung, and COO Stefan Peterson attended the event, which was well attended by Boulder County business owners and executives.

June Market Update: That House Sold for How Much?!

That phrase, as much a statement of disbelief as it is a question, is being uttered by many when they find out the sales price of a home next door, down the street, or across town. It’s one thing to hear that home prices are up 8 or 9%. However, for many casual observers of the market, hearing the actual sales price of a familiar home illustrates what those appreciation rates mean in real world dollars and cents. It is also making homeowners wonder if now is the time to take advantage of additional equity available in their home.


There is no quessoldhometion that homes along the Front Range are worth much more today than they were a year or two ago. In fact, home prices in many Colorado markets are higher than they’ve ever been.

The headline of the most recent Home Price Index report released by Core Logic is “Eight States Hit New Home Price Peaks.” Colorado is one of those states. According to the report, Colorado home prices have increased 8.8% in the last year.


Other home price indices and reports tell a similar story. The most recent Federal Housing Finance Agency report shows Colorado home prices have appreciated 9.3% in the last year. The most recent Case-Shiller home price index for the Denver metropolitan statistical area shows home prices up 9.1% annually.


Even more striking is looking at appreciation over a longer time horizon. According to Case-Shiller, home prices have increased 20% in the last two years and 23% in the last three years. So the average home in the spring of 2011 that was worth $250,000 is now worth $306,000. That’s $56,000 in equity you didn’t have three years ago!


With the rapid run-up in home prices, the obvious question is: “Can these rates of appreciation be sustained, or is the bottom going to drop out and home prices take a dive?”


The answer June1to this question is twofold. It is not likely that home prices will continue to rise at this pace, nor is it likely that home prices will take a dive, or even fall for that matter. Expect to see some moderation as appreciation rates move into the 4-6% range. That said, as long as inventory levels remain low and buyer demand remains strong, 8-10% year-over-year appreciation rates might remain the norm through 2014.


Speaking of which, the inventory supply actually became tighter in May. Supply dropped to 2.0 months across all Front Range markets, setting a new all-time low for the second consecutive month. Like last month, even as more listings hit the market, sales increased at an even faster pace, causing the months of supply to drop.


The volume ofJune real estate sold across all Front Range markets in May eked out an increase of 0.7% compared to May 2013, our first year-over-year volume increase since January. On a month-over-month basis, volume increased 21.7%. Despite this increase, a lack of homes for sale continues to crimp our market.


Curious what your home is worth in this fast moving, rapidly appreciating market? Want an accurate, professional price opinion rather than an automated “guesstimate” based on lagging public records data? Give us a call or send an email. We’d love to help.





This article is a compilation of the insights of 8z Realtors written by Lane Hornung, 8z CEO.


May 2014 Market Update: Sell or Remodel?


Despite a healthy number of new listings coming on the market, the supply shortage actually became more pronounced in April due to an even greater increase in sales. All the new listings, and then some, were absorbed by the market. Unlike other markets around the US, the only thing slowing down our local market is a lack of properties for sale.


The volume of real estate sold across all Front Range markets in April decreased 1.3% compared to April 2013, but was up 21.7% on a month-over-month basis. The inventory of homes for sale remains severely limited at 2.2 months, replacing last month’s 2.3 months as a new all-time low.


MayMarketUpdate1This hot sellers’ market is naturally causing many homeowners to consider putting their home on the market. Alternatively, they are wondering if it would be better to stay put and take on a remodeling project. Remodel vs. Sell is a timely question for many, and the following guide provides relevant issues to consider.


First, let’s take a look at the pros and cons of each:


Remodel: Pros

-   If you like your existing home, you get to keep it! This is your chance to correct any deficiencies.
-   You can take advantage of the low cost of financing. With strong home appreciation over the last few years, Home Equity Lines of Credit (HELOCs) are relatively easy to qualify for and have attractive low rates.
-   Remodeling is less disruptive than moving. (Unless it turns into the “never-ending” project.)


Remodel: Cons

-   Remodeling does not change the location of the home. If your home is not in your ideal location, you will just end up with a better home that’s still in the wrong location or on the wrong lot.
-   You may not end up with exactly what you want. Any sizable remodel project has inherent construction execution risk and budget risk once the actual work begins. This is especially true in older homes that often have unforeseen “surprises” inside the walls or subflooring.
-   Many remodeling projects do not have a high return on investment (ROI) and you will not recoup in appreciation the cost of the project. The home improvement projects with the highest ROI tend to be the simplest, and frankly are not all that appealing to homeowners. According to Forbes, the highest ROI remodel projects are new paint, a yard makeover, plumbing and electrical repairs, new appliances, new flooring, and a new front door. Modest kitchen and bath remodels also have decent ROI. The projects that are the most “sexy” also tend to be the most costly with low ROI. These include a room addition such as a bedroom or bathroom, or converting a room to a home office.


Sell: Pros

-   Selling frees you from being tethered to a location that may not be optimal for you. The burbs were great when you were raising kids, but now they’re in college. On the flip side, the urban scene was wonderful when you were single, but now you and your family need more space both inside and outside your home.
-   Selling allows you to reap some profits from the sound investment you made years ago when you purchased your home. Selling now in a strong sellers’ market is an opportunity to diversify and take some chips off the table.
-   If your house is dated or has a challenging floor plan, remodeling may not solve your home’s issues. A new construction home, an existing home, or a new spec home may be the real solution.


Sell: Cons

-   You have to find somewhere new to live. This is a challenge, but even in this tight inventory market, it is quite solvable and is only a temporary issue, often of shorter duration than a remodel project.
-   You might sell “too early” if prices keep rising. The future direction of the market is unknown, but it is a definite that today’s market is amenable to sellers.
-   You may have to secure a new mortgage at a rate higher than your existing mortgage. (Note: The current 30 year fixed rates are about 4.25%; not much higher than the lowest rates of last year.)


Pros and cons aside, probably the most important thing to consider in assessing a Remodel vs. Sell decision is how each option fits with one’s personal situation and individual life plan. You are probably a better fit for remodeling if you plan to, and will be able to, remain in your house for an extended period of time after the remodel and the current location is where you want to be. That way you get to enjoy the fruits of your labor.


You are probably a better fit for selling if your existing home no longer meets your needs or your stage in life. Of course, neither option is a bad one, and as they say, having the choice of remodeling or selling is a good “problem” to have.


If you are thinking about remodeling or selling, give me a call or send me an email. I’d be happy to give you my professional opinion on the ROI of any potential remodel projects so you can make informed decisions.


This article is a compilation of the insights of 8z Realtors written by Lane Hornung, 8z CEO.


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April Real Estate Market Update: Merchandising Matters


As the theme of the market continues to be a shortage of listings, proper merchandising when selling a home is critical for sellers to maximize their sales price. We will take a close look at the art of merchandising a home in this month’s newsletter, but first let’s review the market data.


The volume of real estate sold across all Front Range markets in March fell 7.4% compared to March of 2013. As predicted in last month’s newsletter, the lack of available homes for sale is stifling the market and resulting in fewer sales.


We also see that in the inventory numbers. Even though more listings came on the market in March, there were plenty of buyers waiting to snap up those new listings. The number of sales jumped 31.2% from February, causing the supply of active listings for sale to drop to 2.3 months, the lowest figure on record. This is clearly a great time to be a seller.


In Boulder County, sales volume increased 2.5% on a year-over-year basis in March. Like the broader Front Range market, the number of sales jumped 24.1% from February, causing the supply of available homes in Boulder County to drop to 3.6 months despite more listings coming on the market.


In a market where inventory is this tight, homes that show well and are move-in ready can command a premium. Which brings us to the subject of merchandising.


April2014(1)Webster’s defines merchandising as “the activity of selling goods or services by displaying them attractively in a retail setting.”


Homes are the ultimate exercise in merchandising. The product the consumer is buying and the store in which it is being sold are one and the same. As a result, every square inch of the property is an opportunity to make a positive impression that increases value, or a negative one that reduces value.


For those skeptical that merchandising matters, consider this scenario. You’re in the market to purchase a car, so you go online, look up the Blue Book value of the make and model of the car you want, find two for sale in town and go to see them in person. The first car is immaculately clean, with a freshly waxed exterior, tires gleaming with Armor All, and soft, just-conditioned leather seats. The other car for sale has an exterior covered in road grime, trash on the floor and McDonald’s french fries stuffed into the seat corners.


Is it inconceivable that you would pay $18,000 for the immaculate car and only $15,000 for the french fry car? That’s a 20% swing in value for essentially the same car, based solely on merchandising.


Because we are human and have emotions, merchandising matters. And because homes are so much more than simply financial investments, merchandising is absolutely critical when selling a home.


So what makes for effective merchandising? Unfortunately, it’s the result of hundreds of decisions that are followed up by execution while prepping a home for sale. Every home is unique with its own merchandising challenges and opportunities, so those decisions vary.


This is where a good listing agent comes in. Beyond helping with negotiation, managing the legal aspects and the overall process, and marketing and exposing the home to potential buyers, great listing agents are great merchandisers.


Leveraging their team of specialists (stagers, cleaners, landscapers, handymen, etc), a great listing agent will create a memorable impression when that potential buyer walks through the door. Great listing agents aren’t standing there in the foyer when the majority of those buyers come through the door, and even if they were, they would step back, close their mouth, and let the house (and all the work they did to prep the house) do the talking.


In a sellers’ market like we have today, it’s tempting to conclude that anything will sell and you could simply pop a “for sale” sign in the ground without taking the time to properly merchandise the home. That is a mistake that could cost a seller tens of thousands of dollars.


Merchandising is an often-overlooked place where a good agent adds significant value and ultimately increases the net proceeds of their sellers. With inventory expected to remain tight for the foreseeable future, effective merchandising will remain critical to maximizing value for sellers.


If you are thinking about selling, or just want to talk about home merchandising, give me a call or shoot me an email. I love this stuff!


This article is a compilation of the insights of 8z Realtors written by Lane Hornung, 8z CEO.


March 2014 Update: Lack of Listings Choking the Market

lackoflistingsIt became clear in February that we have a supply problem. There just are not enough homes on the market. The lack of available inventory is actually stifling the market and resulting in fewer sales.


The volume of real estate sold across all Front Range markets in February fell 0.6% compared to February of 2013. The inventory of homes for sale became even tighter, dropping to 2.5 months of supply, clearly indicating a market that favors sellers.


As mentioned in last month’s newsletter, the housing market has been sending mixed signals this winter, some data indicating a softening market while other metrics showing strength. National analysts have blamed weaker home sales on decreasing affordability. The theory is that the combination of higher home prices and higher interest rates have made buying a home too expensive, pushing some potential buyers out of the market. The resulting decrease in demand ultimately translates into lower sales. In our local markets, this is simply not the case.
lackoflistings2We do not have a demand problem. We have a supply problem. Decreasing affordability may be taking some buyers out of the market, but certainly not enough to create a lack of demand. There are still plenty of buyers in the market, and they’re not leaving due to rising interest rates and home prices. They are desperately trying to purchase homes, but there are simply not enough move-in ready, realistically priced listings for all these buyers.


As a result, fewer sales are closing than would be if the market had a larger supply of listings. For every listing that sells, there are often one or two other ready, willing, and able buyers who wanted to buy that home, but now have to wait for new listings to come on the market. This scenario is being played out multiple times daily across our markets.


Unfortunately, the lack of supply appears to be a structural problem that probably will not be solved in the near term. Even if the spring market brings a plethora of new listings, the supply vs. demand equation has become so out of balance that these new listings will just be gobbled up, bringing only temporary relief and not a fundamental shift toward a more balanced market.


The market needs another source of listings to satisfy demand. With foreclosures and short sales rapidly declining, distressed properties will not solve the inventory shortage. The answer lies in new construction homes. As capital for new communities and infill redevelopment projects becomes more available, the builders are slowly ramping back up and housing starts are trending upward, albeit with some monthly ups and downs.


However, building new homes or remodeling existing ones is not an overnight endeavor, so the market will have to wait patiently for this additional inventory to be built and become available.


In the mean time, as long as supply remains tight, there will be upward pressure on prices, making it a good time to be a seller.


This article is a compilation of the insights of 8z Realtors written by Lane Hornung, 8z CEO. Follow 8z Real Estate on Facebook.