REAL ESTATE NEWS DEC 2020 / JAN 2021
Happy Holidays from Your Castle!
We are finally getting close to the end of this hectic year!! When 2020 started few of us expected to live through what is arguably the worst pandemic in a century. It has been such a mixed year of setbacks and small victories. Many of us have had to totally alter our lifestyles to meet the challenge. Just getting groceries became an ordeal!
Considering how hard this year has been on local families, communities, and our great state of Colorado, all of us at Your Castle want to thank you for your continued readership and patronage. We are immensely appreciative of each and every one of our clients. As vaccines begin to distribute and we see a glimmer of hope moving into 2021, continue to stay safe and be kind to one another. Try to help someone out in their hour of need. Everyone could use an extra bit of support during the holidays. Cheers to 2021 and, as always, let us know how we can better serve you.
An Unceasing Year Finally Does Come to an End
In another light, many have asked me recently, “What will 2021 bring for the real estate market?” Although there is no crystal ball when it comes to the market, if we look at trends from this year it can guide us to a better understanding of what next year might bring. DMAR (The Denver Metro Association of Realtors) puts out a year-end report detailing various real estate metrics. In November the number of Active Listings (attached + detached) on the market was just above 3,400. That is about 50% down from where it was last year! By comparison, over the past 15-20 years, the average was around 14,000 active homes & condos. These extremely low levels of inventory are driving a sense of scarcity in the market, so average prices are going up. How much are they going up, you ask? Based on the data, home prices are up about 13% on average so far this year vs. the same timeframe last year (Jan.-Nov.).
As shocking as these numbers may seem, they are really misleading for several reasons. Entry-level inventory is much lower than normal, but the number of luxury homes ($1MM+) and near-luxury-homes is about normal according to historical trends. Additionally, the more affluent buyers in our market have been the least impacted by the recession, so they are still able to buy homes, and are taking advantage of record low interest rates.
The result is that we have sold a rather extraordinary number of luxury and near-luxury homes this year. But we have not sold nearly as many entry-level homes as you would expect. This is because supply for these properties is just not available on the market, and that buyer-pool has been much more impacted by the recession. So when you see that home prices are up 13% this year, what has really happened is that the mix of what we have sold has skewed towards a more luxurious product in 2020.
A Much Different Year Is Just Around the Corner
So what will happen in 2021? The recent developments with vaccines have a huge role to play. As of writing this newsletter, one vaccine was just approved by the FDA. Another vaccine is expected to be approved a few days from now. With the availability of two vaccines, the projection seems to be that the majority of people in this country who want to receive one should be able to do so by around early summer, 2021. My expectation is that the economy is going to improve after that. People who have so far been reluctant to sell their property because they do not want strangers bringing the Coronavirus into their homes, will start to feel more comfortable doing so. That fear should start to go away.
A stronger economy, more consumer confidence, and then more inventory as a result, should lead to an increase in the number of homes for sale in the lower end of the market. All the homeowners who would have sold in 2020 and did not do so will be listing in 2021. This inventory will be in addition to all the people who would have been selling in 2021 anyway. The net result should be a large increase in the number of entry-level homes that get sold. We have already sold a lot of luxury homes to people who would have originally bought one next year.
Therefore, the dramatic price change from this year should start to compress. In fact, it would not surprise me if the average home price goes down. It will not mean everybody’s home value went down. It will just mean that we are selling more entry-level product and less luxury product. The number of total units sold may remain flat—to perhaps increasing slightly. The marketing time for homes should stay near historic lows. If you are thinking about selling a home, 2021 should be a great time to do it!