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

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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.

 

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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.

 

303-543-3083

clientcare@8z.com

 

 

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

 

May 2014 Market Update: Sell or Remodel?

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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

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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.

 

Real Estate is Broken. We are Fixing It.

lane

“Real Estate is Broken. We are Fixing It” is the core purpose of 8z Real Estate. It’s why we exist as a company. It’s what gets me up in the morning and headed out the door to spend another day chipping away at fixing an industry that is entrusted to handle one of life’s most important financial and lifestyle decisions.

 

This blog is dedicated to peeling back just what we mean by “real estate is broken.” We will cite specific examples of what is broken by looking at the industry from every angle. Once we have a “broken” pinned down, we’ll offer “fixes”, some of which 8z is already putting into practice, while others remain a “to do” for the future.

 

Big picture, we think the industry is broken for both the consumer and for the professionals who serve the consumers. For those who think real estate agents are what is broken and the ultimate fix is to “disinter-mediate” and banish agents for all time, we think that’s a simplistic, naive view that fails to address the reality of what is actually broken in real estate. On the flip side, this is not a place where you’ll find a lot of love or sympathy for unprofessional, unethical, and/or incompetent real estate agents. They are clearly a big part of why real estate is broken. More on that later.

 

This blog is aimed at anyone who agrees with the basic premise that the real estate industry is broken. But it’s not for those who are content to sit on the sidelines and just gripe about it. It’s for those want to be part of fixing it, whether they work in the business or participate as consumers.

 

This is not a place for those who think everything is hunky dory in real estate, or that the consumer experience of buying, selling, or owning a home cannot be improved upon. Just because an industry is broken, does not mean every person and company in that industry is messed up. For example, we would probably all agree that the health care industry is not quite perfect, but we all know individual nurses, doctors and companies that are superlative. Real estate is no different.

 

A comment I often hear is “I hate real estate agents, but I love my agent Bob.” That simple sentence perfectly captures why real estate is broken for both the consumer and for the agent.

 

We look forward to fixing it and hope you’ll join us for the journey.

 

Sincerely,
Lane Hornung
head fixer, 8z

 

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February Update: Amid Mixed Signals, Tune Out the Noise

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The market entered 2014 by posting mixed numbers in January. Some data indicates a strengthening market, while other metrics signal a slowdown.

 

The volume of real estate sold across all Front Range markets in January of 2014 increased 16.5% compared to January of 2013. The inventory of homes for sale remains severely limited at just 2.8 months of supply compared to 3.6 months last January.

 

In Boulder County, sales volume fell 12.5% on a year-over-year basis in January. The supply of available homes in Boulder County ticked up to 4.3 months as sales slowed and more homes were listed, but supply is still lower than the 4.6 months posted in Jan 2013. Anything less than 6 months indicates a sellers’ market.

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Other market measures show mixed signals. Nationally, severe winter storms in January in the East and South slowed home sales. In the West, where not all could be blamed on the weather, home sales also slowed on a year-over-year basis.

 

On the bullish side of the ledger, home prices continue to show double-digit year-over-year gains. Core Logic reported that home prices increased 11% in 2013, the largest annual gain since 2005. At the same time, those double-digit increases are expected to moderate as 2014 progresses.

 

Back on the bearish side, the National Association of Home Builders’ monthly sentiment index had its sharpest drop in a decade in February as builders struggle to meet demand due to a shortage of lots and labor. Another signal that the market may hit unexpected headwinds can be found in newspaper stories speculating that institutional investors may dump their properties after deploying billions in cash snapping up bargain basement homes when the bubble burst. Billions, while large, is not all that significant in a housing market that deals in trillions.

 

The exercise of citing conflicting data and mixed signals could go on and on. Instead, let’s cut through the noise by stepping back and looking at the fundamentals of our market.

 

And what we find is a market with limited supply and healthy, if not growing, demand. This is a market where the #1 challenge, and it’s a challenge that is hard, cold reality on the street and not some theoretical metric, is finding homes for buyers who are ready, willing, and able to buy but literally can’t find anything to buy. Good agents (like me) are spending hours upon hours trying to track down or “create” listings so their clients can achieve their goal of home ownership, whether it’s their first home or their eighth.

 

And as great as that makes it sound to be a seller, most sellers also need to buy, so they face the same conundrum on the buy side of the equation. Furthermore, not all listings sell in a day with multiple offers. The market is tight, but it’s not irrational. Listings that are overpriced or not move-in ready will sit and become permanent members of the “passed over” inventory.

 

Final thought- mixed signals in the market are common at this time of year. We’re in the swirling breezes before the storm of the spring market. As a result, one shouldn’t read too much into the January and February data. March, on the other hand, is a tell tale month which often sets the tone for the remainder of the year. Will a lack of listings crimp the market and actually slow sales, or will an influx of new listings give the market more balance and allow buyers and sellers to meet in the middle and transact? Stay tuned.

 

2014: Year of the Move-Up Buyer

JAN2014LaneFollow 8z Real Estate on Facebook!

 

The market finished the year strong, but a dwindling supply of available listings in many areas is crimping sales as we head into 2014.

 

The year-end numbers for 2013 are in, and 2013 was a record breaking year. Home prices surged higher, eclipsing their previous peaks of 2006 hit during the bubble and setting new record highs in many markets. The volume of real estate sold across all Front Range markets in 2013 was up 25.9% compared to 2012, and was greater than any year on record.

 

The market finished the year on a positive note in December, shaking off a slower November that was largely caused by Thanksgiving falling late on the calendar. The volume of sales across the Front Range increased 5.8% in December of this year compared to December of last year.

Jan2014(1)
In Boulder County, sales volume was up 6.8% on a year-over-year basis in December.

 

Steady sales in December and a dearth of new listings coming on the market caused the supply of inventory to contract even tighter. Along the Front Range, the supply of available homes for sale fell to 2.6 months in December, and Boulder County’s inventory dipped to 3.6 months of supply, both tighter than last year at this time. Anything less than 6 months indicates a sellers’ market.

 

The only thing on the horizon that could solve our market’s inventory problem is an influx of sellers this spring who realize that now is a great time to sell. In particular, as investor activity slows and first time buyers grapple with student debt and tight lending standards, the market needs the bread and butter move-up buyer who must sell before buying to alleviate our inventory shortage.

 

And the good news is that there are signs that move-up buyers are returning to the market in force. Because browsing online is often the first step for today’s homebuyers, 8z’s strong Internet presence allows us to catch glimpses of market trends before they become evident. Since the New Year, we’ve been contacted by a disproportionate number of move-up buyers.

 

A few factors seem to be at play. First, many folks have finally let themselves dream about moving after years of sitting on the sidelines and banishing even the thought of moving. The reasons for moving have not changed, whether it is a growing family that needs more bedrooms, a grueling commute that could be shortened, or a floor plan that is no longer workable.

 

What’s changed is that the housing market looks a lot less scary as we enter the fifth year of the recovery. The reality today that cannot be denied, even by market skeptics, is that homes are worth quite a bit more than they were two or three years ago, allowing the move-up buyer to sell for a profit that could be applied to a down payment on their next home.

 

Other factors spurring on move-up buyers include healthy stock portfolios and jobs that are more secure than they were at the depths of the recession.

 

The final and not to be minimized factor for move-up buyers is interest rates trending higher. The rule of thumb is that for every half a percentage point increase in mortgage rates, the purchasing power of a buyer putting 20% down is reduced by 5%. So a buyer who can afford a $300,000 house today would need to start looking at $285,000 houses if rates increase from 4.5% to 5%.

 

So this may be the year of the move-up buyer.. The market is hungry now for great new listings. The buyers are there waiting. Please let 8z Real Estate know if you are considering a move so we can help you evaluate your options.

2014 Real Estate Market Predictions

2014 Prediction: Market Solid as Recovery Enters Expansion Phase

 

As we near the end of 2013, we may as well put a big red bow on the 2013 real estate market. It was truly a gift that benefited millions of homeowners.

2014

 

Despite signs of slowing in November, the 2013 market remains a robust sellers’ market with moderate, but healthy, year-over-year appreciation.

 

The volume of real estate sold across all Front Range markets in November increased just 1.1% compared to last November, breaking a string of 21 consecutive months of double-digit gains. The supply of inventory remained tight at 3.0 months, indicating a market that continues to favor sellers.

 

In Boulder County, the volume of real estate sold in November actually decreased on a year-over-year basis for the first time in 2013, dropping 1.6% compared to November of 2012. The supply of inventory is a scant 3.3 months.

2014-1
Insider tip and something to watch for in December – an uptick in the pace of closings showing that November’s slowdown was more a function of the calendar than any fundamental shift in the market. Specifically, the late Thanksgiving weekend eliminated four closing days at the end of the month, days that are typically big closing days.

 

Now let’s move onto bigger and bolder predictions. Our official, on the record, predictions for 2014:

 

#1. Sellers’ Market Rolls On

 

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.

 

Frankly, it remains a mystery where the new listings will be sourced. Builders have sold everything they have, and the number of build-ready lots is in short supply. Foreclosures and distressed properties are on the wane. In fact, Colorado foreclosure filings in October hit their lowest level since the Division of Housing began keeping monthly records in 2007. That leaves the bread and butter move-up buyer who needs to sell in order to move as the primary source of new listings in 2014.

 

#2. More Buyers Drive Up Demand

 

Demand for housing is driven by two primary factors: jobs and interest rates. It looks like job growth in 2014 will be robust and widespread. Colorado is projected to be in the Top 5 states for growth in 2014.

 

On the interest rate front, rates are up about a point in 2013 and will probably edge higher in 2014 as the Fed tapers its bond purchase program. That said, rates are widely predicted to remain below 6% in 2014, a rate that historically has not adversely impacted the demand for housing.

 

Bottom-line, folks who have jobs or are relocating for new jobs buy houses, especially if they’ve been sitting on the sidelines for years waiting for the “all clear” signal. For many, that signal has sounded and they are entering the market, even as investors who pine for the “bargain basement” days of 2011 exit.

 

The end result will be gains of 5% to 10% in the volume of real estate sold in 2014 compared to 2013.

 

#3. Home Values Up 4% to 6%

 

We’re nearly three years into a classic real estate cycle. In 2014, our market should shift from the recovery phase into the stable expansionary phase of what may end up being a five to seven year cycle.

 

While it’s difficult to foresee whether this cycle will last that long, it’s much easier to predict that home prices will rise next year, barring an unforeseen geopolitical or macroeconomic “black swan” event. The conditions of low supply and high demand that drive up prices are firmly in place.

 

However, we are predicting that prices will only increase about half as fast they did in 2013. This is a welcome moderation and should allow the market to fend off any potential bubble bursting or rapid price drops that would end the cycle prematurely. We’ll take 5% appreciation any day!

 

Overall Prediction: 8z’s outlook is a solid real estate market in 2014

 

Of course, as real estate professionals, we can only make predictions; we cannot control what the market will do. We are committed to keeping you informed. We will “tell it like it is” as market events unfold in 2014 so you can make informed real estate decisions.

 

Realizing there are far more important things than real estate markets, I would like to wish you and yours a wonderful Holiday Season. May your home be filled with joy and love.

 

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