Homebuyers and sellers in metro Denver can expect another strong year in 2014 — but one with smaller price gains and less of the gold-rush mentality encountered last spring.
“I perceive a healthy and more balanced market this year,” said Steve Blank, managing broker for the downtown Denver office of Fuller Sotheby’s.
Last year, historically low mortgage rates met a tight inventory of homes available for sale, tipping the balance heavily in favor of sellers.
The number of transactions closed jumped 26.3 percent, and the median price of a home sold was up 10 percent, according to statistics from Metrolist.
Buyers, who had grown accustomed to dictating terms and taking their time, were unexpectedly forced into bidding wars and squeezed by rising prices and higher interest rates.
The metro area last year burst through old highs set during the housing boom for the number of homes sold, the dollar value of deals closed and both median and average home prices, said Gary Bauer, an independent real estate research analyst.
This year is starting with slightly fewer homes available for sale than in January 2013, but housing experts don’t expect a repeat for two reasons: higher interest rates and higher home prices.
Home prices, which have regained their old highs in most areas, have recovered enough that sellers can now list a property more easily, which should allow for a greater supply of properties.
And while rising prices make homes less affordable for buyers, they also boost their confidence that they won’t lose value as soon as they buy, Blank said.
One metric to watch is the number of homes available for sale versus the number of homes sold in a month, a measure of balance in the market.
A supply greater than six months of sales is considered a buyer’s market, while less than three months, the case last year, represents a seller’s market, Blank said.
He and others expect the Denver market, still among the tightest in the country, will get above a three-month supply as more sellers come out of hiding this spring.
Another benefit of higher home prices is that they work against foreclosures. New foreclosure filings in Colorado fell nearly 60 percent last year compared with 2012, according to a report Thursday from RealtyTrac.
Estimates vary on how much prices might increase this year, although the expectation is that the gains will be more modest than last year’s.
Denver home prices should gain on average another 6 percent to 7 percent, predicts John Hauber, ZipRealty’s district director for Colorado.
Seattle-based Zillow, which provides a popular website to estimate home values, is calling for Denver home prices to rise 2.1 percent in 2014 after what it calculates as a 9.3 percent gain last year.
Another check on the housing market is higher interest rates. When mortgage rates dropped below 3.5 percent late in 2012, that set the stage for last year’s feeding frenzy, which only intensified when buyers realized the market was bottoming out.
Thirty-year mortgage rates, which Freddie Mac has at 4.4 percent, could top 5 percent as the year goes on, especially if the economy gains traction and depending on how aggressively the Fed “tapers” its purchases of mortgage and government debt securities.
“The availability of credit is the wild card,” said Jed Kolko, chief economist with Trulia.
New consumer-protection rules that took effect this month limit more exotic mortgage types and put more pressure on lenders to prove borrowers can afford to repay the loans they are taking on. The Federal Housing Administration is also cutting down the size of the loans it is willing to fund in more expensive housing markets.
But other trends are expected to keep buyers in the game. Rising rents and lower vacancy rates are increasing the pressure on renters to lock in a monthly payment by buying.
An improving job market should allow more people to afford homes, especially young adults, who have been held back by poor job prospects and heavy college debts.
Metro Denver remains one of the more popular destinations for young adults looking to relocate.
Another support for the existing-home market is the restrained comeback in new construction. Single-family permits in the state peaked at 40,753 in 2004 but by 2009 were at 7,261. The CU-Boulder Business Economic Outlook calls for them to reach 20,000 this year, half the old peak.
Going into 2014, real estate firm Redfin points out five Denver neighborhoods especially popular with home hunters: City Park; the Skyland neighborhood to the north; the Wadsworth corridor south of Interstate 70; Kipling Street north of U.S. 6; and the Applewood Valley area.
Those neighborhoods share an older housing stock needing updating, direct routes into downtown Denver or proximity to the mountains, and neighborhoods with character, said Paul Stone, a senior agent with Redfin in Denver.
Aldo Svaldi: 303-954-1410, asvaldi@denverpost.com or twitter.com/aldosvaldi
