Commencing the real estate market 2017 midyear report! Following are several compelling factors shaping the state of our current real estate market, as well as how these factors compare to those of the previous year:
Average Home Price
The average price of a single-family home in metro Denver went up another 6.8 percent in the past 12 months, reaching $454,771. This 12-month period price increase is lower than the previous 3 years; even so, it remains a sizable increase.
The leading force of home price change is the amount of inventory on the market. Our market inventory continues to be near record lows with only 7,081 single family homes on the market as of June 30 (16,000 – 18,000 is considered a balanced market). This evidence leads me to believe home prices for the rest of the year will continue to steadily increase.
Nonetheless, there is still hope for buyers. There is 4.1 percent more inventory available than there was a year ago. This increase in inventory compared to last year’s raises many questions among those who pay attention to the market: Are sellers starting to put more property on the market? Will this satisfy the overwhelming demand we’ve seen from buyers the past several years? Will the market begin to move toward greater balance between buyers and sellers? Unfortunately, only time will tell and it’s currently too early to predict.
What is certain, however, is that until more inventory returns to the market, prices will continue to increase as demand continues to exceed supply. The natural question that follows is where the new supply of home inventory will come from. We know that it won’t be bank-owned properties or shortsales. Denver currently has the lowest percentage of distressed (bank-owned and shortsale) properties among the largest 25 cities in the U.S. The metro Denver economy is strong and unemployment is at a record low, so there will be very few distressed properties coming onto the market for the foreseeable future.
The additional supply will eventually come from homeowners who finally recognize that this is an excellent market to sell and thus decide to put their homes on the market. When this will happen in earnest is anyone’s guess. We’ve seen scant evidence of homeowners making this realization so far, despite the slight uptick in last month’s inventory. Sooner or later this additional inventory will begin to return to the market.
Number of Homes Sold
Presently, there is so little inventory in our market that the number of single-family homes sold is actually decreasing from years past. There were 1.3 percent fewer homes sold in June 2017 than June 2016 simply because market inventory is so scarce.
The Investor Market
Denver remains a worthwhile place to invest in real estate. The fix and flip market is thriving for those with the tools, patience, and time to find lower-priced houses to buy and repair in a short period of time. Once these homes are fixed up, selling them is a piece of cake thanks to a major lack of competing inventory.
The buy-and-hold market will continue to be exceptionally profitable for long-term investors. Interest rates and vacancy rates are still near record lows as rent prices continue to increase – an astronomical 40 percent increase over the past 4 years! One thing that will never change for building long-term wealth is rental property ownership. Touch base with me if you’re interested in exploring how we can use this data to your advantage!