Welcome to the real estate market 2018 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 leapt another 10.5 percent in the past 12 months.
- Inventory: Our market inventory continues to be near record lows, with only 7,217 single family homes (which includes condos and townhomes) on the market as of June 30th. When the July 2017 Newsletter was written last year we talked about how the June 2017 inventory had increased a bit compared to the year before. It’s interesting to look back on this and what has happened since:
“However, there is a glimmer of hope for buyers because this is 12 percent more inventory than there was a year ago. Are sellers starting to put more property on the market for sale? Will this begin to satisfy the overwhelming demand we’ve seen from buyers the past several years? Will the market begin to move to greater balance between buyers and sellers? Only time will tell and it’s still way too early to predict. What is certain is that until more inventory returns to the market there will continue to be tremendous upward pressure on prices as demand continues to outstrip supply. And where will the new supply of home inventory come from? 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 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 realize what a great market it is to sell and decide to put their home up for sale. When this will happen in earnest is anyone’s guess. We’ve seen very little evidence of homeowners making this realization so far despite the uptick in June’s inventory. Sooner or later though additional inventory will begin to appear. That’s your sign of a changing market. But this might take several more years, which is why prices will continue to rise strongly in the meantime.”
The answer to these questions a year later is NO! Last year many were predicting the market would begin to turn downwards following the 12 percent increase in properties on the market. A year later we have a market just as strong as it was last year with little inventory and continued appreciation. Let’s see what the next year brings!
- Number of Homes Sold: Because there is so little inventory in our market, the number of single-family homes sold is actually going DOWN year over year, not up. There were 5.1 percent fewer homes sold in June 2018 than June 2017 simply because there is so little inventory on the market.
- The Investor Market: Denver is still a great place to invest in real estate. The fix and flip market is strong for those who can find underpriced homes to buy and repair. They’re out there but it takes tools, patience, and work to find them. Once you get one fixed up, selling is the easy part because of the lack of competing inventory. The buy-and-hold market will continue to be extremely profitable for long-term investors. Interest rates and vacancy rates are still near record lows and rents continue to increase. It’s not difficult to buy a rental property in today’s environment and put it on the path to be paid off in 13-15 years. Just think how your life would change if you owned a couple of rental properties free and clear! For building long-term wealth it’s tough to compete with rental property ownership. That’s the one thing that will never change.