Two months into 2014, and it's starting to feel a lot
like 2013 all over again.
Record low inventory, multiple offer shootouts, an
overall market absorption rate of 1.45 months.. yeah, this is the same song
that just led to 10% appreciation in 2013.
The inventory of homes for sale in the metro area fell to
6,026 homes at the end of January, a new all-time low that was nearly 10% under
last March's previous bottom. From
December 31 to January 31, a time when you might think more listings would come
on the market, the active inventory actually plunged by 800 homes.
If you're a buyer looking to "steal one", this
is a little bit demoralizing.
We've talked repeatedly here about why the inventory is
low - no more foreclosures, large numbers of "boomerang buyers", no
new construction under $325k, record in-state migration, an improving Denver economy, low rates, high rents. Add it
all up and the market remains just smoking hot.
We actually had an increase of more than 8% in the number of
homes that went under contract in January of 2014 versus January of 2013,
despite the fact that prices are up to 10% higher and rates are up a full
percent over the past 12 months.
In Denver, higher prices and higher rates are not
deterring anyone from buying a house.
With the Fed now backing off of Quantitative Easing
(which has artificially held rates down since 2009), the near certainty of
higher rates a year from today seems to be driving buyers to act while
affordability is still reasonable.
A year ago, however, affordability was unbelievable.
I do believe that this year's market is going to be even
more "tiered" than in past years, meaning that demand for homes under
$300k is going to continue to sizzle while higher end homes are more vulnerable
to value stagnation, especially as rates rise later in the year.
For 2014, the psychology on the street is that owning is
better than renting, rates in the 4's today are better than rates in the 5's
tomorrow, and migration and a dramatically improved economy have essentially driven all fear
out of the market.
If you aren't ready to get in, don't bother showing
up. The market in Denver below $300k
remains swamped with buyers, and the only way to create balance between supply
and demand is for prices to continue going up until buyers back off, which hasn't happened yet.
