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 2013. So let’s jump right in.
Average Home Price: The average price of a home in Denver grew 14% in 2012, surpassing even the most optimistic forecasts (including my own!). I believe this year will be almost as strong with an average price increase of 8-10% and here’s why: The number one driver of home price change is the amount of inventory on the market. In 2007 we had a peak of 27,500 properties on the market and prices dropped 14%, while in 2012 we averaged 10,000 properties on the market and prices went up 14%.
For the past 10 months we have had the same 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 simply because demand is outstripping supply. Where will the new supply of home inventory come from? It won’t be bank-owned properties and short sales. After five long years our economy is finally recovering 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. When this will happen is anyone’s guess. We’ve seen very little evidence of home owners making this realization so far, as evidenced by the continued lack of inventory on the market. Sooner or later, the fact that it’s such a tremendous seller’s market has to become more widely known and that’s when the number of sellers will increase. But this might take another 6-12 more months which is why demand will continue to outstrip supply in 2013 and prices will continue to rise.