MARKET STATS

Real Estate Market Update 2012 Market Outlook: Slow Motion Recovery Continues

By Lane Hornung

The market ended 2011 in a manner that has become typical during the slow motion housing recovery that we are now two years into. It's not all that dramatic and does not make for great headlines, but the market continues to grind along showing modest improvement.
 
The total volume of real estate sold in Dec across all Front Range markets was up 1.1% over Dec 2010, ending the year with a run of six straight months posting a positive year over year gain.

For the entire year, Front Range sales volume in 2011 topped 2010 sales volume by 0.8%. Not a huge, headline grabbing gain, but certainly a positive, solid sign of recovery.
 
The inventory of homes for sale along the Front Range dropped even further in Dec and ended the year at a shockingly low 4.6 months of supply. There simply are not enough active listings to satisfy demand at the lower price points.
 
In Boulder County, the volume of real estate sold in Dec was down 13.5% compared to Dec 2010, a weak end to the year. Active listings decreased faster than sales, causing a further tightening of inventory. Boulder County's supply now stands at 6.8 months.

So that wraps up 2011. What will the Colorado housing market look like in 2012?
 
The short answer: "A lot like 2011." Specifically, we are predicting the following for 2012:
 
#1. Sales volume up 1% to 5% in 2012
Demand will continue to grow. Colorado home buyers are gaining confidence as they realize that our housing market is much healthier than the national housing market they read about in the newspaper.
 
However, an acute lack of supply at the lower end of the market will mean many ready and willing home buyers will have a difficult time finding a property to purchase. This inventory shortage will actually hold the market back in 2012, resulting in modest year over year increases in volume.
 
Note- more inventory, including the much feared but yet to be seen flood of "shadow inventory" from bank foreclosures, might actually help the market meet demand, resulting in sales volume increases of more than 5% in 2012.
 
#2. Home values flat, plus or minus 3% in 2012
2012 home values and prices will look a lot like 2011, and 2010 for that matter. Overall, home values have been bouncing along the bottom within a narrow range of plus or minus 5% for more than two years now.
 
Of course, there are exceptions in specific markets and price points, both positive and negative, to this generalization. For instance, luxury homes in areas where developable land is plentiful have seen more than a 5% drop in value in the last two years.  On the flip side, homes in neighborhoods with low price points and few foreclosures have appreciated more than 5%.
 
Many of these same market segment themes will continue to play out in 2012. Overall though, prices will remain stable, if not ticking up slightly, as measured by macro pricing models such as the Case Shiller index that combine all market segments.
 
Note - 2012 may be the year in which we see appreciation of greater than 3% in the lower price ranges. A lack of inventory, coupled with high demand from investors who are attracted by soaring rental rates and first time buyers who are escaping those same rental rates, may result in significant appreciation at the low end. A 2012 appreciation surprise to the upside in the lower price market would eventually work its way to the middle market and increase home values more broadly.
 
#3. Colorado outperforms national market in 2012
Colorado will continue to be a market that leads the housing recovery. If the so-called national experts want to see what a recovery in the housing market looks like, they should book the next flight to DIA.
 
When they arrive, they may not be blown away by what they see, but this recovery is not about double digit increases and sizzling hot markets.  It's about slow, incremental gains.
 
Bottom-line: 8z's outlook is a stable market in 2012
 
Of course, as a real estate professional, I can only make predictions; I cannot control what the market will do. However, what is in my control is my commitment to keep you informed and to tell it like it is, both good and bad, as the market unfolds. You can count on me for that!

Posted on 2.1.2012 / / 2 Comments

Colorado