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Colorado Market Insights

for the month of January 2015

Every ending has a new beginning. An old year has drifted away and now we’re on to who knows what. For the Colorado Front Range, the real estate market has progressed over the course of the past three years. Single family home sales were 36,393 (2012); 42,544 (2013); and 40,430 (2014). Attached unit sales were 9,328 (2012); 11,616 (2013); and 14,553 (2014). The combined market was 45,721 (2012); 54,160 (2013); and 54,983 (2014).

The average days on the market for a single family home in the Front Range in 2014 were 46 days. This compares to 59 days in 2013 and 86 days in 2012. The Absorption Rate – the time it would take for the market to fully turn assuming no new inventory and homes selling at the same pace – was just over one month for 2014.

This past year was characterized by a lack of available resale inventory. The year ended with 3,992 active single family homes across the Front Range. This compared to 5,763 active single family homes at the end of 2013 and 11,185 active single family homes at the end of 2012. In 2010, when the Denver Metro and Northern Colorado real estate markets plateaued and began to turn in a positive direction, there were 22,189 active single family homes across the Front Range at the end of the year.

Scarcity creates demand and that’s what has led to an increase in home values. The average sales value of a single family home in the Front Range in 2014 was $367,724. That compares to $336,899 for 2013 and $310,602 for 2012. On average home values will have increased 15.53% during the past three years. A healthy return based on the economic concept of leverage - an investment strategy of using borrowed money (a mortgage) to generate investment returns (equity and appreciation). Like most things in life, there’s some degree of risk if the real estate market shifts and turns south, as we saw in the Denver Metro and Northern Colorado market areas and across the country in 2006 through 2010.

Looking back on 2014 (an ending) there were a number of positives that led to a “healthier” real estate market. Mortgage interest rates vacillated between 4.5% in January (a beginning) to a tad below 4% in December (an ending) for the traditional thirty-year fixed rate loan. The Colorado Unemployment Rate was 6.1% in January (a beginning) and was projected to be around 4.1% in December (an ending). A barrel of crude oil was $115 in June (a beginning) and under $60 by December (an ending).

The latest annual United States inflation rate through November/2014 was 1.3%. Low inflation is good for consumers, with prices on goods and services not increasingly markedly year over year. This results in a homeowner’s monthly mortgage payment remaining relatively stable over time. With the U.S. Federal Reserve ending its bond buying program (Quantitative Easing 3), indications are they’ll start raising interest rates sometime in 2015.

Don’t look for any significant changes in the real estate landscape in the Colorado Front Range in 2015. Available inventory will continue to remain at historic lows. Home values should increase moderately as buyer demand sustains itself. Days on the market for well-priced properties will be minimal. All in all, it will be another good beginning.

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