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Lon Welsh 303-619-0633 [email protected] -1- © Your Castle, Inc. 2011
Denver Real Estate Trends: Update 8/5/2014 HomesHome: 9430 Owl Lane, Boulder. $2.99MM. Courtesy of Sotheby's.
Metro DenverReal Estate
Market Trends
Charles Roberts
• Broker/Owner - Your Castle Real Estate
• Board Director & Education Chair – Denver Metro Association of Realtors
cell: 303-523-3837email: [email protected]
Lon Welsh 303-619-0633 [email protected] -2- © Your Castle, Inc. 2011
Sales vs. inventory 2007 – 2013. Inventory levels are still historically low.
Source: Gary Bauer, Metrolist
30,827
Lon Welsh 303-619-0633 [email protected] -3- © Your Castle, Inc. 2011
Source: Your Castle Real Estate analysis, MetrolistNote: DSF = Detached Single Family Home
$0
$50
$100
$150
$200
$250
$300
$350
$400
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 13
Denver Metro (DSF only, not condos or townhomes)Sales Prices in $000
Peak (1987)to trough (1988):$105 to 101K -4%
Peak (2006) to trough (2009): $322K to $241K: -25%
Average Annual Appreciation = 6%
Denver Metro Home Prices:•Peak - 2006•Trough - 2009
Lon Welsh 303-619-0633 [email protected] -4- © Your Castle, Inc. 2011
Denver metro average home price by month. 2012 and 2013 have both seen dramatic increases over 2011. Price growth in 2014 has posted slight gains over 2013.
Denver Metro – Average Home Price$ thousands
225
250
275
300
325
350
J F M A M J J A S O N D
'08 '09
'10 '11
'12
Source: Your Castle Real Estate, MetrolistNote: These stats are composite MLS, which includes Boulder
225
250
275
300
325
350
J F M A M J J A S O N D
2012 2013
14
Lon Welsh 303-619-0633 [email protected] -5- © Your Castle, Inc. 2011
Showings / Active ListingDSF + CND for YCRE. 2009 - 2014
0
5
10
15
20
25
2009 2010 2011 2012 2013 2014
Source: Your Castle Real Estate analysis, Centralized Showing Service
First tax credit
Second tax credit
2012
2011
2009
2010
2014
2013
Showings / Active Listing / Month
Lon Welsh 303-619-0633 [email protected] -6- © Your Castle, Inc. 2011
72%
72%
68%
57%
43%
28%
Source: Your Castle Real Estate analysis (7/6/14), Metrolist
233
317
618
1,157
1,222
1,741
1 < 1005 sq ft(smallest 10%)
2 1005-1320
3 1320-1805
4 1805-2390
5 2390-3105
6 3105+ sq ft(biggest 10%)
# Active ListingsAs of 7/6/14
3,937
5,898
9,778
9,441
5,414
3,026
# Sold Listings7/1/13 – 6/30/14
Price ChangeJuly’12-June’13 vs. July’13-June’14
Avg Px Chg= +8%
0.7
0.6
0.8
1.5
2.7
6.9
Months of InventoryAs of 7/1/14
Avg = 1.2
% Listings UCAs of 7/6/14
Avg DOM = 29
Avg DOM = 74
Avg = 53%
Denver Homes (no condos or townhomes)Based on above-grade SF
Avg DOM = 28
Avg DOM = 29
Avg DOM = 37
Avg DOM = 48
13%
11%
10%
6%
5%
2%
Inventory by Home Size
Lon Welsh 303-619-0633 [email protected] -7- © Your Castle, Inc. 2011
Our amazing pent-up demand for home ownership!
1. Home formation (e.g., marriages) increasing dramatically!
2. The inflow of immigrants is rebounding strongly!
3. The population of metro Denver increases about 1.5% per year. What a great place to live!
4. People who lost homes can finally buy again!
5. Those who could buy in the downturn but didn’t are realizing the mistake they made!
6. Home prices are rising so renters don’t want to miss out forever!
7. Renters are completely getting priced out of the rental market!
8. Is legalized marijuana bringing more residents to Colorado?
Lon Welsh 303-619-0633 [email protected] -8- © Your Castle, Inc. 2011
Why Sellers Aren’t Selling
• Some potential move-up buyers are holding back while they weigh whether to abandon a phenomenally low interest rate on their current mortgage in order to buy a different home
• Afraid of being caught without a home when they sell.
• There’s nothing for them to buy.
• They think the up cycle is near the end.
• They don’t know they can qualify for a new home.
Lon Welsh 303-619-0633 [email protected] -9- © Your Castle, Inc. 2011
Source: Census Bureau, Your Castle Real Estate analysis.
0
250
500
750
1000
1250
1500
1750
2000
2250
2500
19201924
19281932
19361940
19441948
19521956
19601964
19681972
19761980
19841988
19921996
20002004
20082012
Great Depression
-89%
World War II-81%
Great Recession
-72%
New construction declined significantly in the last recession.
Number of New Home Starts (thousands)
Lon Welsh 303-619-0633 [email protected] -10- © Your Castle, Inc. 2011
-
500
1,000
1,500
2,000
2,500
3,000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
89 90 95 00 05 10 13 2014
Total DSF dealsPopulation 000
Source: Census Bureau, Denver Chamber of Commerce, Metrolist, Your Castle
Population (thousands)
DS
F T
rans
actio
ns
Recession
Recession
Hyper-boom
Denver Market Cycles•Does this look like an impending crash?
Lon Welsh 303-619-0633 [email protected] -11- © Your Castle, Inc. 2011
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
2011 2Q 3Q 4Q 2012 2Q 3Q 4Q 2013 2Q 3Q 4Q
Long term interest rates… over the longterm.
Source: Freddie Mac, Your Castle Real Estatehttp://www.freddiemac.com/pmms/pmms_archives.html
30 year fixed rate: 1971-2013
’70s Avg = 9% ’80s Avg = 13% ’90s Avg = 8% ’00s Avg = 6.5%
$1610Payment, P+I, $200K loan $2210 $1470 $1260 $965
$170,000Max home $60K person can afford $125,000 $190,000 $220,000 $290,000
Current = 4%
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
1971 1972 1974 1976 1977 1979 1981 1982 1984 1986 1987 1989 1991 1992 1994 1996 1997 1999 2001 2002 2004 2006 2008 2009 2011 2013
30 year rate
30 year fixed rate: 2011-13
’10s Avg = 4.1%
Lon Welsh 303-619-0633 [email protected] -12- © Your Castle, Inc. 2011
Par Mortgage Rate’s for 30 Year Fixed
Lon Welsh 303-619-0633 [email protected] -14- © Your Castle, Inc. 2011
Data Source: The Conference Board
90.9 in July, ‘14
X
Lon Welsh 303-619-0633 [email protected] -16- © Your Castle, Inc. 2011
Denver Metro (Condo & Townhomes only, no DSF)Sales Prices in $000
Historical context. The average Denver condo price from 1972 to 2014 has mostly been a march upwards: appreciating 5.5% per year. 2013 saw condo prices hit all time highs. 1Q14 is continuing the trend.
Source: Your Castle Real Estate, MetrolistNote: CND = Condo; DSF = detached single family home
0
50
100
150
200
72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Full year
1Q '14
Peak (1985)to trough (1989):
$83K to $56K-33%
Trough (1989) toRecovery (1994)
$56K to $80K+44%
Peak (2004)to trough (2009):$191K to $157K
-15%
Lon Welsh 303-619-0633 [email protected] -17- © Your Castle, Inc. 2011
Your client asks you:
“Should I rent or buy?”
Lon Welsh 303-619-0633 [email protected] -18- © Your Castle, Inc. 2011
Lon Welsh 303-619-0633 [email protected] -19- © Your Castle, Inc. 2011
Long term, real estate is still part of the “American Dream”
Lon Welsh 303-619-0633 [email protected] -20- © Your Castle, Inc. 2011
http://www.trulia.com/rent_vs_buy/
Rent vs. Buy AnalysisSo Cool!!!
Lon Welsh 303-619-0633 [email protected] -22- © Your Castle, Inc. 2011
Let’s say your client has an extra $100,000 to
invest…
Should they invest in:•An annuity?•Bonds?•Gold?•The S&P 500?•Rental properties?
Lon Welsh 303-619-0633 [email protected] -23- © Your Castle, Inc. 2011
Total Income
Years
S&P 500
Gold
Cash Purchase
Bonds
Annuity
Purchase 4 props with Financing
Lon Welsh 303-619-0633 [email protected] -24- © Your Castle, Inc. 2011
300
400
500
600
700
800
900
1000
81-Q
1
82-Q
1
83-Q
1
84-Q
1
85-Q
1
86-Q
1
87-Q
1
88-Q
1
89-Q
1
90-Q
1
91-Q
1
92-Q
1
93-Q
1
94-Q
1
95-Q
1
96-Q
1
97-Q
1
98-Q
1
99-Q
1
00-Q
1
01-Q
1
02-Q
1
03-Q
1
04-Q
1
05-Q
1
06-Q
1
07-Q
1
08-Q
1
09-Q
1
10-Q
1
11-Q
1
12-Q
1
13-Q
1
0
2
4
6
8
10
12
14
16
81-Q
1
82-Q
1
83-Q
1
84-Q
1
85-Q
1
86-Q
1
87-Q
1
88-Q
1
89-Q
1
90-Q
1
91-Q
1
92-Q
1
93-Q
1
94-Q
1
95-Q
1
96-Q
1
97-Q
1
98-Q
1
99-Q
1
00-Q
1
01-Q
1
02-Q
1
03-Q
1
04-Q
1
05-Q
1
06-Q
1
07-Q
1
08-Q
1
09-Q
1
10-Q
1
11-Q
1
12-Q
1
13-Q
1
25 year trend for vacancy and average rents in Denver metro (5+ unit buildings). Vacancy at just below 6% seems to be the magic number for rent growth. Vacancy for 1-4 unit buildings is 1.7%!! 5+ are at 4.4%.
High VacancyAvg = 9.9%
Low rent growthAvg = 1.4% / yr
High rent growthAvg +6.6% / yr
Vac
ancy
Rat
e b
y Q
uar
ter
%M
edia
n R
ent
by
Qu
arte
r ($
)
High VacancyAvg = 8%
Low rent growthAvg = 1.1% / yr
Source: Apartment Association of Metro Denver
Low VacancyAvg = 4.7%
Low VacancyAvg = 5%
High rent growthAvg +4.2% / yr
Lon Welsh 303-619-0633 [email protected] -25- © Your Castle, Inc. 2011
Vacancy Rates are at all-time lows!
2004 2005 2006 2007 2008 2009 2010 2011 ’12 ’13 ‘14
13.1%
1.5%
5.2%4.2%4.0%
7.1%
9.5%
13%
10%
8%
6%
3%
Vacancy rates in Denver Metro for 1-4 unit properties
3.6%1.6% 1.7% 2.0%
Lon Welsh 303-619-0633 [email protected] -26- © Your Castle, Inc. 2011
Key messages for homes. In 2013, we saw strong growth in sales price and volume. Inventory, which is tight now, will not get better (from buyer’s point of view) until at least 4Q 2014 (probably later). We expect continued moderate price increases for homes.
Metric Performance Observations
Average Home Price $
2Q13 vs. 2Q12: +12%3Q13 vs. 3Q12: +12%4Q13 vs. 4Q12: +9%1Q14 vs. 1Q13: +9%2Q14 vs. 2Q13: +8%
Prices jumped +8.5% in 2012. 2013 was up another 9%. This was driven by the lack of inventory on the low and middle range of the market. So far in 2014 prices have risen 8%. Small homes will continue, for at least one more year, to outpace most other size categories, in our view.
MOI : Months of Inventory
07/01/13: 2.0 MOI10/01/13: 1.7 MOI01/01/14: 1.4 MOI04/01/14: 1.2 MOI07/01/14: 1.7 MOI
MOI has been stable to declining for 24 months. The bottom smaller 50% of the market (homes up to 1805 sq. feet) have approximately 0.7 MOI – a very strong seller’s market. The luxury market is balanced, with 6.9 MOI for the largest 10% of homes in the Denver area. Denver still remains a strong sellers market at all price points for at least another year.
Showings per Active Listing per Month
2Q 2010: 6.92Q 2011: 9.12Q 2012: 11.62Q 2013: 14.22Q 2014: 16.9
Showings are a good leading indicator for UC… which predicts sales. Showings in 2Q14 were up from 2Q13. In 2014 the amount of new inventory is actually lower than this time last year. Showings per listing will be higher if there is less to choose from. As in 2012 and 2013, the number of “desirable” homes that are priced right will still sell rapidly with lots of showings.
Under Contract (UC)
03/31/13: 4,78106/30/13: 6,54109/30/13: 4,89703/31/14: 5,42006/30/14: 5,866
UC is the best leading indicator of sales. At the end of 2Q14, homes under contract were up 11.8% from the first half of ‘13. Showings were up, too. We anticipate 3Q14 unit volume will remain at least as strong as ’13.
Number Sold 2Q13 vs. 2Q12: +21%3Q13 vs. 3Q12: +25%4Q13 vs. 4Q12: +16%1Q14 vs. 1Q13: +8%2Q14 vs. 2Q13: +5%
2012 unit sales were +12% vs. 2011. 2013 was up +16% from 2012. Through the first half of the year, sales volume is up 6% from ‘13. Price increases have not (yet) brought extra inventory in the market. It’s inevitable that increased prices will increase inventory, but its impossible to know when. We expect to see some additional inventory in 2014.
Inventory 06/30/12: 5,88309/30/13: 5,23212/31/13: 4,42603/31/14: 3,73906/30/14: 5,288
Inventory levels continue to stay low, especially for smaller homes. This will continue to drive price increases on the low end. With prices above pre-Recession highs, essentially all sellers should be able to afford to list and sell their homes. Almost no one is “underwater” in Denver. Inventories should increase.
Source: Your Castle Real Estate analysis, MLS base dataNotes: As of 7/6/2014. This does NOT include Colorado Springs, Ft Collins, Boulder, Summit/Vail or any other non-Denver market. As
a result, our stats will not match MLS by design (MLS includes some non-Denver markets).
