Real Estate News
Happy New Year! Now that the holidays are over it’s
the perfect time to talk about what I think the real
estate market will look like in 2017.
So let’s jump right in.
1. Average Home Price:
The average price of a single-family home in metro
Denver increased another 9.07 percent in 2016,
finishing the year at $442,467. I believe 2017 will be another
strong year with an average price increase of 6-8 percent and here’s why:
The number one driver of home price change is the amount of inventory on the market.
In 2007, for example, we had a peak of 31,000 properties on the market
and prices DROPPED 14 percent, while in 2016 we averaged just 7,000 properties on the market
so prices ROSE more than 9 percent. For the past several years we have had record low inventory in metro Denver
with absolutely no sign of it increasing. Until it does there will continue to be tremendous
upward pressure on prices as demand outstrips supply. Where will the new supply of home
inventory come from? It won’t be bank-owned properties or shortsales – our metro Denver
economy is as strong as it’s ever been and a better economy means fewer distressed properties.
The additional supply will eventually come from home owners who finally realize what a great
market it is and decide to put their home up for sale. But when this will happen is anyone’s
guess.
Part of the issue is an interesting catch-22 where many potential sellers look at the market and
think they can’t find their dream home because of the lack of inventory – therefore they don’t
put their homes on the market – thereby contributing to the lack of inventory. I frankly don’t see
any reason to think this will change any time soon. Low inventory and rising prices are here to
stay for the foreseeable future.
2. Number of Homes Sold:
There was a very small increase in the number of single-family homes
sold in 2016 vs. 2015 of just 0.47 percent. So while prices rose strongly,
the number of sales was flat simply because there was so little inventory on the market to buy.
I don’t foresee any dramatic change in 2017. I expect a 3-4 percent increase in
2017 home sales, if only because our Denver metro population is rising 1.5+ percent per year and all these people
need to live somewhere!
3. The Condo & Townhouse Market:
For the fourth year in a row the condo and townhouse
market did even better than the single-family market in 2016 with an average
price increase of 12.1 percent! Just like the single-family market I don’t
see any evidence that would lead me to believe this will change any time soon. The inventory has been at rock
bottom for years and until more attached inventory comes on the market prices will continue
to rise. The one caveat to this may be the luxury attached market. There has been a tremendous boom in
attached new builds the past few years and this market began showing signs of cooling in 2016.
4. The Investor Market:
I think the real estate investor market will remain strong with very little
change in the outlook. The fix and flip market will continue to
be profitable 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 due to the lack of
competing inventory. The buy-and-hold market will continue to be extremely generous to long-
term investors. Vacancy rates are still at record lows and rents continue to sky
rocket. It’s not difficult to buy a rental property in today’s environment and put it on the path to be paid off in
12 – 13 years. For building long-term wealth it’s tough to compete with rental property ownership.
That’s the one thing that never changes!
