Why should 2011 start out any different than 2010?
We’re slogging through a recession, or at least just coming out of one. Many Buyers seem to be sitting on the proverbial fence. Some Sellers are still partying like it’s 1999, or at least pricing like it’s 2006. Other homeowners are electing to stay out of the market altogether and aren’t becoming Sellers.
What’s different? Inventory and Taxes.
Inventory – This year we have a few more homes on the market than we did a year ago. Last January, there were 17,465 homes for sale in Metro Denver. The high for any January since 2005 was in 2008 with 24,489 homes on the market. Every January between 2005 and 2008 there were in excess of 21,000 available homes in Denver. 2009 was the only year since ’05 to see inventory fall below 20,000, and that was only 252 properties less.
With the slight increase in inventory over last year, we may be witnessing the beginning of Sellers’ confidence to get back in the market. Inventory is still incredibly low, and Buyers are having a hard time finding enough good homes to view (in certain price points and neighborhoods.)
Taxes – There isn’t a tax credit this year to create urgency in Buyers. They can afford to wait to find their perfect home (ignoring that with rates rising, buying power erodes.) Buyers are incredibly picky, and they still believe it’s a Buyers’ market. It will be for a bit longer, but if inventory stays this low for long, Sellers may have more leverage in their negotiations.
Eventually, the lack of inventory will result in Sellers getting back in the market, builders coming back to building and prices gradually rising. Prices will rise slowly, with home appreciation remaining in the single digits for another several years. Anything without a negative sign in front of it will be good appreciation. We’d hope to at least match the inflation rate, but beating inflation and becoming an appreciating short-term investment isn’t likely.
Denver real estate buyers put nearly 17% more properties under contract in January over December 2010. That’s still down from the “tax credit January” of last year, but it’s a good sign that stabilization will be the watchword this year.
If you’re interested in searching for a home in Denver, Gretchen Rosenberg’s web site has the tools you need. Search at www.gretchenrosenberg.com.