If you lived through the Denver housing market of 2013, this story doesn't surprise you.
The Denver Business Journal has ranked Denver's housing boom as its number one story of 2013, beating out floods, recalls and yes, marijuana.
Growth in home values created over $21 billion in new equity for Denver metro homeowners during 2013, with a median priced home gaining about $25,000 in value. This led to more consumer spending, more job growth and more new construction.
The year was marked by an unprecedented inventory shortage, overwhelming buyer demand and record low interest rates, which sparked bidding wars and market velocity which was so extraordinary that in June, over half of the homes that went under contract in the Denver MLS were on the market six days or less.
Interest rates were in the 3's for much of the year, thanks to the Federal Reserve's ongoing Quantitative Easing policy. The Fed pumped nearly $1 trillion into the housing market nationally by funding mortgages and then purchasing the notes at discounted rates. The Fed has announced that it will end the QE program by the end of 2014 (although I am skeptical that the Fed will have the discipline to pull the plug, especially in an election year).
Rates rose into the 4's during the fourth quarter, as markets braced for the Fed's expected pullback in 2014.
The median home price in the Denver metro area increased somewhere between 9.3% (according to Zillow) and 10.2% (according to Core Logic), which followed an impressive 8.5% gain in 2012.
Foreclosures and short sales, which accounted for 45% of listing inventory at the start of 2011, now make up less than 5% of the active listing inventory.
Population growth also continued to be a big story. According to a report released on Monday, Colorado has gained over 800,000 residents in the past three years, the fourth strongest growth rate among the 50 states. During that same time, fewer than 100,000 new homes have been built.
This demographic pressure has kept upward pressure on rents and prices while vacancy rates remain at historic lows. Rents increased nearly 5% in 2013 and the vacancy rate in Denver is 4.4%, although in some markets (like Fort Collins) vacancy rates are less than 2%.
Zillow also has ranked Denver as the fifth healthiest housing market in the country heading into 2014, with the best market ranking of any major city not located in California (which saw far greater value losses during the downturn). Zillow has given Denver a rating of 8.1, meaning that the Denver market is in better shape than 81% of all markets surveyed.