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Now
let’s compare the actual year-to-date numbers with the predictions we made
at the outset of 2016.
#1. Sellers Keep the
Advantage
“Inventory
levels will remain well below the six-month benchmark that divides a
sellers’ market from a buyers’
market.”
Mid-Year
Update: This prediction has proven accurate. Even though many home owners
have realized now is a great time to sell, not enough of them have listed
their homes to satisfy the demand of first-time buyers, move-up buyers and
relocators entering the market.
Looking
ahead to the second half of 2016, expect to see a more balanced market with
more inventory. June saw a flurry of new listings come on the market. Many
of these listings were immediately snapped up, but if this trend continues,
inventory shortages may ease a bit in the second half of the year. Rather
than the 1 - 2 months of supply that has been the norm, inventory levels
could edge up to the 3 - 5 month range. This will give buyers not only more
listings from which to choose, but a bit more negotiating power as multiple
offers become less prevalent.
#2. Tight Inventory and
Higher Rates Won’t Stop Buyers
“Job
growth and relatively low interest rates will give buyers the confidence to
enter the market. Buyers will have to compete for a limited supply of
inventory, thwarting many from actually completing a purchase. Enough will
find a way to closing, resulting in an increase of 5% to 10% in the volume
of real estate sold in 2016 compared to 2015.”
Mid-Year
Update: This prediction has only proven partially accurate. There is no
question that low interest rates, which dropped even lower just after
Brexit, are fueling a high level of buyer demand.
What
has proven less accurate is the volume increase prediction. Through the
first half of 2016, the volume of real estate sold across all Front Range
markets is up just 2.0%. Because the number of transactions is lower this
year, this gain is solely the result of higher prices.
In
the second half of 2016, it looks likely that monthly volume will remain
flat year-over-year or be down slightly. An increase in available listings
will help free up the market and allow more buyers to close. At the same
time, uncertainty due to large scale events, including the Presidential
elections, may cause some buyers to put their home search on pause.
#3. Home Values Up 6%
to 8%
“We
expect to see appreciation rates exceed 10% through the first half of the
year before settling back down to the 6% to 8% range by the end of 2016.”
Mid-Year
Update: Home values are performing just as predicted or better! According
to the most recent Federal Housing Finance Agency data, of the 20 cities in
the entire US with the highest annual appreciation rates, four are located
in Colorado: Denver metro, Fort Collins, Greeley, and Boulder. All have
seen one-year appreciation in excess of 10%. Overall, Colorado has a
one-year appreciation rate of 8.9%.
However,
we’re already seeing signs of these appreciation rates moderating a bit in
the second half and settling back down to a 6% to 8% range. Mind you, a
moderation in appreciation rates does not mean prices will start falling;
they just won’t be rising at such a torrid pace. This is a healthy market
adjustment and will begin to alleviate growing concerns that a lack of
affordability could weaken the overall market.
Overall,
it looks like we will move toward a more balanced market in the second half
of the year.
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