Getting your player ready...
Lots of people have a crystal ball, but the reception on broker/analyst Jack O’Connor’s set is remarkably sharp. After a week when a surprising number of people believed that the Mayan Calendar would bring the entire world to an end, I asked him ‘What looms through the mists?’ “First,” he answered, “I want to tell you what’s already happened.”
The buzz from the past two years has been about inventory. “The slide has been dramatic,” O’Connor said, “leaving some Denver buyers not able to find a home or competing with multiple offers. When there’s inventory, there’s no urgency. But when inventories drop as in 2012, buyers make their moves.” O’Connor, broker/owner of The Denver 100 Real Estate who’s analyzed the market for nine years, says prices should rise when inventory falls, but not necessarily at the same rate. Inventory of single-family homes on the market will end the year at around 7,467; compared to 9,221 12 months ago, down 19 percent. Condos followed suit – from 2,329 units to 1,688 now, down 28 percent. Drops were sharpest under $500,000. Homes over a half-million, however, saw no real reduction – 2,175 units then and 2,136 units now. “The upper ranges,” said O’Connor, “are still searching for a buyer pool.” Homes below $500,000 made up around 90 percent of sales this year. Meanwhile, prices saw their first big jump in five years. Median price of a single-family home Jan. 1, O’Connor says, will be up around 9 percent over last; prices of condos up around 14 percent. Prices rise as the number of days that units spend on the market drops. Days-on-market are down about 27 percent in 2012 for single-family homes; 33 percent for condos. Where are we headed? “You’re going to see inventories level off, and in some cases they may increase slightly,” O’Connor said. “The reason is there’s still a lack of equity in the market that holds sellers back. Prices have not risen enough offset the drop in value we’ve seen.” Also figure in that homebuilders, he predicts, will add more homes in 2013 than over the last four years combined. Meanwhile, owners who refinanced to 3.5 percent or lower are seeing the equivalent of a raise of $200 to $300-per-month in income; and they’re getting comfortable with that money. Unemployment here is down, but will likely hang in the mid-7 percent range – something else that works against drastic drops in inventory. How about sales? Watch for them to stay the same; don’t expect to see the 20 percent increase we saw this year. “Last year we had abnormal numbers of buyers entering the market due to low rates and better stability in their personal finances,” O’Connor said. There’s even a possibility sales could fall a little – held back by rigid borrowing guidelines that work against self-employed or newly employed workers. Here are the nuts and bolts: If you have a home priced below $500,000, expect around 4-to-6 percent appreciation next year, depending upon the location. “I don’t see any prices below $500,000 taking a loss in value in 2013 without a major job loss in one area,” O’Connor said.And remember, he adds, builders are bringing on new homes that are energy efficient competitors to your older place. Jack O’Connor sends out a monthly ‘So How’s the Market?’ letter, available at JOConnor@TheDenver-100.com. Mark Samuelson writes on real estate and business; you can email him at mark@samuelsonassoc.com. You can see all of Mark Samuelson’s columns at DenverPost.com/RealEstate. Follow Mark Samuelson on Twitter: @marksamuelson