DON'T PANIC - THE MARKET IS JUST FINE

Don't panic - the fundamentals of the Denver housing market remain remarkably strong.

But while a botched MLS rollout and the distractions of the holiday season have some wondering if the market is slowing down, I believe that you will see a strong January with buyers back in large numbers and agents getting the hang of our new MLS system.  

For 2014, however, we’re going to have recalibrate our thinking a little bit as year-over-year statistics begin to reflect the huge changes which have occurred over the past 24 months.

Falling inventory has been the number one driver of price increases over the past two years, caused in large part by the fact that foreclosures and short sales have essentially disappeared from the landscape after dominating our market for nearly seven years.  

The numbers are going to moderate going forward, not so much because buyer demand has abated (it definitely has not), but rather because year-over-year comparisons are now going to be made against a market that has been sizzling hot for nearly two years.

Going forward, the new story will be more moderate price increases and rising inventory levels.  Get used to it.  

But before you start to worry, consider the following (from our last full month under the Prime Access MLS system):

In October of 2012, there were 3,164 homes that went under contract.  In October of 2013, however, 3,874 homes went under contract.  That's an increase of over 20%, and compared to October of 2011, when 2,850 homes went under contract, the October 2013 numbers reflect a 35% increase.

The market is just fine, thank you.

Price increases will moderate because you simply can't pile 10% price increases on top of 10% price increases for very long.  The 10% price gains in 2013 are on top of the 8.5% gain we saw in 2012.   

I've talked with clients for years about how "tiered" our market is, with different realities at different price points... and that will continue.  Lower end inventory will continue to outperform higher end inventory, especially with builders now roaring back into the market (starting at about $325k and heading north from there) and throwing up new homes at a breakneck pace.

The name of the game remains land value and replacement cost, and as long as lower end homes are cheaper to buy than they are to build, you really can't go wrong.  

The big stories in the housing market next year will be interest rates and the national economy, which continues to struggle (even while Denver has seen impressive growth, with the unemployment rate now below 6.0%).   

We have experienced a remarkable two year run in the Denver real estate market, and inventory has now bottomed out.  Expect to see more homes for sale on a year-over-year basis with value increases in the single digits.  

But while supply will increase, the place to keep your eye is on demand.

Because as long as buyer demand remains strong, the housing market will continue to function very well.