South Denver 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 South Metro Denver, the real estate market has vacillated over the course of the past three years. Single family home sales were 5,606 (2012); 6,430 (2013); and 5,869 (2014). Attached unit sales were 1,341 (2012); 1,700 (2013); and 1,891 (2014). The combined market was 6,947 (2012); 8,130 (2013); and 7,760 (2014).
The average days on the market for a single family home in South Metro Denver in 2014 were 31 days. This compares to 41 days in 2013 and 70 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 approximately a month for 2014.
This past year was characterized by a lack of available resale inventory. The year ended with 427 active single family homes in South Metro Denver. This compared to 645 active single family homes at the end of 2013 and 1,626 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 3,219 active single family homes in South Metro Denver 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 South Metro Denver in 2014 was $410,040. That compares to $372,891 for 2013 and $355,105 for 2012. On average home values will have increased 15.47% 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 South Metro Denver 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.