Trends Influencing Our RE MarketLIV Sotheby's
It is now fair to say that everyone is conscious of the economic recovery, both locally and nationally. According to a recently released Gallop poll, growing confidence in the housing market has placed real estate as the #1 long term investment strategy over gold, stocks/mutual funds, CDs and bonds. The poll illustrated a clear preference for homeownership in all major gender, age and income groups. The important financial and emotional impact that owning your own home represents places it at the top of any investment schedule, not to mention a few bucket lists.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), stated that “More buyers than usual entered this year’s competitive market”. He went on to say that “While contract activity being up (convincingly) compared to a year ago is good news, the increased number of traditional buyers, who appear to be replacing investors paying in cash is even better news”.
According to Realty Trac, for Q1 2015, in the world of non-owner occupied (investor) purchases, 44.7% were to all cash buyers, down from 61% a year ago. A few related (good news) facts are:
- Investor activity is being driven by the smaller (Mom-Pop) investors with the institutional type backing off.
- A growing number of investors (all types) are no longer buying all-cash, but are taking advantage of available financing options.
- All-cash buyers accounted for 25.9% in Q1 2015 of all home purchases down from 30.3% in 2014.
- An interesting note is that among metro areas (over 500,000 in population), the highest share of all-cash sales were in Miami with 51.5% of the total sales. The top five all-cash cities were all located in Florida.
On the other side of the spectrum (owner-occupied) there is much improvement predicted for first-time buyers entering the market, primarily Millenials. First-time buyers were only 27-29% of the market for the past five years, which is considerably lower than the traditional levels of 38-40% since the 1970s. Denver is still ranked #1 for attracting Millenials (according to the Demand Institute).
The Urban Land Institute (ULI) is predicting solid real estate growth for their new three year forecast through 2017. Their findings were based on 43 of the industry’s top economists. Lower unemployment rates should lead to improved wage growth in part due to a shortage of educated/skilled workers. The ULI expects mortgaged-backed securities to rise to $150 billion by 2017, from 115 billion in 2015. Average prices for existing homes in the US, are anticipated to rise at least 5% in 2015 and 4%-5% through 2017.
Denver predictions are trending from 7% to 12% (approx. 10% so far in 2015) in annual appreciation. According to current statistics from our multiple listing service (RE Colorado), the average sales price for a home (condo or single family) in Metro Denver was $362,000. Single-family detached homes actually eclipsed the $400,000 pricing landmark. The national average for Days on the Market, before it sells, was 89 days, as compared to about 25 in metro Denver. This is usually good news, but a word of caution should be employed as almost 30% of accepted contracts fall through over issues with inspections, appraisals and financial conditions. It is prudent to retain counsel from experienced real estate professionals to correctly guide you through, and help you avoid typical issues, thus saving you time, aggravation and money.
Although pricing is predicted to average 5% appreciation across the US in 2015, from March 2014 to March 2015 values increased 6.1% (excluding distressed sales). Combining years 2012 – 2014, Denver property values increased nearly 28%. New household formation (general demographics) are strengthening the markets in cities like Dallas, Houston, Seattle and Denver (to name a few) with pent up desire due to new marriages, babies, divorces, empty nesters, retirement and vacation homes.
Giving focus to individual housing needs has become easier today than over the past six years. There are more lending options, greater availability of money, and more lifestyle opportunities to choose from. But it is like hoping to win the lottery; you must be in the game to win.
LIV Sotheby’s International Realty compiles monthly, quarterly and year-end reports to help consumers make better real estate decisions, whether purchasing or selling a home.
To access current market reports visit www.coloradomarketreports.com. For more information, contact downtown managing broker, Steve Blank, of LIV Sotheby’s International Realty at 303.520.5558¬. To service all of your real estate needs visit www.livsothebysrealty.com.