2015 was a great year to be a seller and a tough year to be a buyer. Let’s look at the sales stats from Denver Metro and Boulder County
A tale of 2 cities:
Denver Metro – While 2015 showed a slight increase in new listings, pending sales, and sold listings over 2014, the two years were very similar everywhere but pricing. Denver’s appreciation led the nation among major metros at over 11%. 3 years of rapidly dropping inventory and huge demand not only has homes selling for more, they’re also selling 26% faster than in 2014.
Boulder County – Boulder tracks residential real estate numbers a bit differently, separating data for single-family homes and attached homes. Single family stats showed around a 2% drop in inventory with an almost 9% increase in sales! And while attached home inventory dropped by almost 8%, sales were down under 2%. In 2015, single-family and attached homes sold 10% & 20% faster and at 9% & 15% higher average prices, respectively.
Where did we come from?
The National Association of Realtors defines a Buyer’s market as a market in which there is over 6 months of inventory. A Seller’s Market is one with less than 6 months of inventory. Currently, between Denver & Boulder, we have around one month’s inventory.
In 2013 our real estate market crossed over from the most extreme buyer’s market in history (2008) into what is now the most sellers market we’ve ever seen. And that’s where we remain today: at the top of the curve in a strong Seller’s market across the board.
What does it all mean?
Clearly, low inventory & high demand defined 2015 & will likely define 2016 as well. And while most sellers are ecstatic about this historically-low inventory, they’re not excited to enter this same market as a buyer. The result – if someone doesn’t really have a great reason to move, they likely won’t. Therefore, there’s no sign of an upswing in inventory for resale homes.
New builds aren’t really keeping up, either. The 19,000 new homes built in 2015 aren’t enough to house the net migration of over 100,000 people who moved to the Centennial State in 2015 (assuming 65% are to the Front Range).
“Migration to Denver and Colorado remains strong. People are moving here out of choice and not necessity at a rate nearly double what the national average is. This market is fueled by wealth and not credit”
-Elliott Eisenberg, National Economist
Let’s face it. Colorado is a great place to live, and everyone knows it.
Where are we going?
Similar to weather forecasting, we review past years with similar conditions. Unfortunately, there’s never been a seller’s market like this one, and yet, one can extrapolate that 2016 will be like last year, only more aggressive.
Speed – As agents and buyers have become accustomed to seeing homes and submitting offers within 24 hours of the listings hitting the market, the new normal is writing offers the DAY homes list.
Strong appreciation – Even when buyers often have to pay above the current appraised value, when our markets are appreciating between 10-12% per year, they’ll build equity very quickly.
Is it sustainable?
Bubbles are usually revealed by 2 things: oversupply of homes and rapidly increasing sales. Our inventory is still declining, and our sold listings are only up by 9%. Generally, a housing bubble would show much higher year over year sold listings. Plus, the number of homes that have expired and failed to sell have flat lined, as have distressed sales. Our market is like the reverse of a bubble – no supply and steadily increasing prices.
The bottom line:
In Boulder, almost half of all homes on the market were already under contract as of the beginning of January, and Denver is looking pretty similar. While the market usually starts to pop in March, we’re already seeing multiple offers on our listings and competition for our buyers.
Whereas, the increase in home prices and interest rates may cause a bit of a plateau this year, 2016 is already starting off even stronger than 2015.