A new year is upon us, and with that, brings another set of predictions and resolutions. 2012 was a transitional time for real estate in Northern Colorado. We started the year unsure of recovery, and ended the year up over 20% in volume and sales. I know 2013 will continue the positive trend. Here are my 6 predictions for Northern Colorado real estate in 2013.
1) Values Will Rise
Because of increased demand, and lack of inventory, buyers are getting competitive with their home searches. When buyers see a home they like, they need to be quick on making a GOOD offer, before getting beat out by another buyer. It is because of that competition that prices will continue to rise. We will see increased competition, which will lead to either multiple offers or near 100% offer to list price ratios. Understanding the competitive nature of the market, savvy sellers and Realtors will increase initial list prices to hopefully squeeze a little more profit out of a home sale. Only a major jump in available homes will negate the rising home values.
2) Inventories Will Slowly Rise
Over the past two years, active inventory levels (homes that are on the market but not under contract) have fallen. This has been both good and bad for the industry. Originally, inventory levels were at what seemed like near "all time" highs because so many people were trying to sell their home and there were no buyers interested. Proverbially, they were all trying to jump off the sinking ship.
Since then, by the passing of time and increased economic confidence, those homes eventually sold and we saw more reasonable inventory levels. Since then however, those who 'could' sell their home have sold their home, and those who couldn't (due to employment or negative equity) have been waiting on the side lines. Now that we are on the upswing, more and more folks will be able to sell and more active listings will be on the market, giving sellers more to choose from, and an overall healthier market. Let's also not forget those who bought under the first time home buyers tax credit, who were obligated to stay in their home for 3 years before re-selling. The last remaining push of those buyers could possibly turn to selling in the first and second quarter of 2013, bolstering inventory levels.
3) Time on Market Will Decrease
Time on market is a major indicator of how stale or furious a particular market can be. The shorter homes are on the market, the quicker the market is moving. This indicates that there are willing buyers making acceptable offers in a shorter period of time. Over the past few years, days on market (DOM) from list to close has been over 115-130 days. Over the course of 2012, however, we saw that number decrease, although not dramatically, breaking the 100 day mark within a few micro markets. This is all a great indication of where we're heading.
4) New Construction Will Strengthen
As mentioned above, active inventory levels are very low, leaving buyers less choice in selecting a home. Over the past 5 years, new construction has been at a near stand still. Builders and developers understand the pent up demand and lack of available homes and have been quick to put a shovel in the ground. My prediction - new construction will be a major catalyst for economic growth and stability over the next 3 years, and maybe beyond.
5) Foreclosures and Short Sales Will Decrease
If you're still sidelines, waiting for the effects of a "shadow inventory", you're probably missing the boat. Foreclosure activity has been falling substantially over the past year, even 20-30% year over year in most parts of Northern Colorado. This is extremely good for the market. Most buyers low ball or get discounts on foreclosures and short sales due to their inherit risks. These reductions are sometimes compared to more traditional sales, dragging down neighborhood values by comparison. Now, even short sales and foreclosures sales prices are moving much closer to original list. The reason behind fewer distressed properties is because fewer homes are underwater, either due to improving real estate markets, or improved employment or financial situations. Even homeowners at or near negative equity know that if they will be able to potentially sell with just another year or two of continued growth and appreciation. The future is looking bright for those homeowners.
6) Optimism and Confidence in the Market Will Increase
Because of the items listed above, I know that the consumer will once again feel safe to buy or sell a home. On top of that, we are all ready for a change and can see it coming. Hope is returning, especially in Northern Colorado, and confidence and activity in the housing market will be a major contributor to our overall economic picture.
Jared Reimer is a real estate expert at Prudential Rocky Mountain Realtors in Northern Colorado. Real estate is his passion and he always wants to connect with like-minded and savvy real estate fans. For more information or to get in touch with Jared, please visit his website at www.ReimerRE.com or email him at JaredReimer@ReimerRE.com