How Will 2014 Real Estate Compare with 2013?

How Will 2014 Real Estate Compare with 2013?

As we head into 2014, it’s a great time to review what the real estate market experienced in 2013 and where we think it’ll head in the New Year. Overall, I’m extremely pleased with what we’ve experienced in the past 12 months and am bullish for the future. I expect the economy to continue to improve and our metro Denver housing market to stay strong but, critically, not to overheat. Here are a few different metrics I use to evaluate the market and help you understand it better. For each, I’ll briefly describe what 2013 looked like and where I think we’re headed.

Market strength – 2013 was a strong seller’s market. The market strength peaked in the spring and summer when the bottom dropped out of our inventory and we closed a record 4,857 deals in July. The good news is that since then the market has reacted appropriately and with the rise in prices, more sellers have put properties up for sale, cooling the market down somewhat. It’s still a strong seller’s market today but it’s not overheated. I expect 2014 to continue to be a seller’s market but I see no sign of a major imbalance in the market that could lead to any sort of ugly peak and crash.

Rental Vacancies – The rental market is stronger than it has ever been in metro Denver. The vacancy rate for 1-4 unit properties is a record low 1.4% Rents are rising faster than they ever have in the past. As a result of the rising rents, we are beginning to see is more renters deciding it’s time to buy instead of suffering through more rent increases and tougher application processes. In addition, more and more homeowners who experienced hardships during the downturn, lost their homes and have been renting ever since, are now able to purchase a home again as their ability to finance a purchase recovers. This is great news for the market and will certainly lead to more sales in 2014, continuing to support our seller’s market.

Interest rates – We had a big jump in interest rates in June as the economy showed signs of improvement. But, much to everyone’s surprise, it didn’t put much of a damper on the housing market. Since then rates have drifted downward keeping home affordability near record highs. No one knows exactly what interest rates will do but it is clear that until the economy recovers they will remain near record low levels. I foresee incremental improvement in the economy over the next year so my best guess is that interest rates may rise a little in 2014, but only a little. 2014 is still going to be a great year to buy a home.

The Economy – Let’s continue to talk a bit more about the economy. While I don’t see vast improvement in our overall economic outlook, I do see improvement. The unemployment rate will probably continue to fall slowly, inflation will stay in the range of 1-2%, and consumer confidence will continue rising. Nothing can be better for the housing market than a slowly but surely improving economy. This is what real estate market dreams are made of! In a steadily improving economy buyers and sellers behave rationally and buy and sell in a controlled environment, based on solid personal, financial, and economic reasons. At the same time it avoids the problems associated with an overheated market where prices pop then crash like we experienced during the last downturn.

When all’s said and done, I can’t wait for 2014!

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