As we begin the new year, it’s a great time to review what the real estate market experienced in 2018 and where we think it will head in 2019. How do we feel about the past year? How do we feel about the future? Here are a few different metrics that we use to evaluate the market and help you understand it better:
As you can see from this graph, inventory levels are historically low. It took several years for the inventory to get this tight; it will take several years for inventory to build back up to historically “normal” levels. If inventory continues to rise, which we believe it slowly will, then it will likely be easier to sell now than in the future.
No one knows exactly what interest rates will do in the future, but our best guess is that they may rise a little in 2019. The Federal Reserve is expected to raise short term rates during 2019 as a natural response to the current strength of the economy. However, even if the Fed raises rates, that does not directly affect the 30-year home buyer interest rate you are most concerned with as a buyer or seller. Long-term interest rates, affected by the bond market, are unpredictable. That being said, home-buyer interest rates are still held at historically low rates and are unlikely to fall any further.
The Denver economy is quite strong right now, and is predicted to carry the momentum into 2019. The state of Colorado is on track to add 65,000 jobs this year (a growth rate of 2.4%), and currently has one of the lowest unemployment rates of any of the states. This is connected to our high net migration rates, with around 53,000 people being added this year. In 2019, we are expecting the economy to grow about 2.7% and for net migration to rise again by about 50,000 people. We anticipate the economy to continue to grow, but at a slightly slower pace than we saw this past year.
For the past several years, we have had record low housing inventory in Denver. November showed a 28.4% increase in new listings from the previous year, with 8,077 houses listed. Homes in good condition that are priced correctly are still selling faster than the historical average. However, as demonstrated by the chart below, the number of sold listings has decreased by 16.8% from November of last year, with 3,831 homes sold in the metro Denver area. We expect inventory to continue to increase in 2019.
The rental market remains super strong. The vacancy rate for 1-8 unit properties currently has the lowest vacancy rate at 2.6%. Rents are rising quickly, with the average rent increasing by 3.7% since this time last year. As a result of rising rents, we are seeing some renters deciding that it’s time to buy instead of suffering through additional rent increases and tougher application processes.
The economy is always unpredictable, but we are able to make highly informed assumptions on what may happen based on the past. Overall, we are very optimistic about the real estate market for 2019.
A tip for Buyers: Take advantage of the current market
If you are a buyer, it’s a better time to buy now than any time in the last five years, and here are some reasons why:
- Fewer buyers to compete with
- Sellers are surprised their homes didn’t sell as fast as homes in the spring, so some of them are more motivated than usual
- Reports of sellers being much more likely to accept contingent offers, a little less than asking price, provide seller concessions, and are working more with buyers on inspection items.
If you are a first-time buyer or investor, this is an excellent opportunity! I’m not sure how long this opportunity will last, but I recommend that buyers take action before February, as late January is historically when the spring sales boom begins. Reach out to me if you’re considering buying. I’d love to guide you through the process!
A Tip for Sellers: Stage your house to sell it faster
Because showing traffic is much slower in the winter, if you decide to list your home in the next few months you may want to consider having your home professionally staged. One of the leading home staging firms found that houses that have been staged spend about a month less on the market than homes that have not been staged.
To stage your home in the winter, ensure your yard is as manicured as possible by shoveling and de-icing your walkways. Keep the temperature warmer inside the house while clients are there. If you have a fireplace, turn it on! Remember, when it comes to decorating your home for a showing or open house, less is best. This includes furniture and holiday decorations. Most people love the holidays, but it is important to remember that there are some people who do not. It is always best to play it safe and keep holiday decorations to a tasteful minimal style.
If you have any questions or concerns about selling in the near future, give me a call. I’d love to help you navigate the right move for you in our current market!