As the year draws to a close, we’ll take a look back at our 2015 market predictions and assess how accurate they turned out to be. First, let’s set the stage by reviewing the market data for November.
The total volume of real estate sold in November across all Front Range markets decreased 1.0% compared to November of last year. This is the first month this year we’ve seen a year-over-year decline in volume. This may signal a broader trend of a slowing market as suggested by many recent headlines, or it may simply be a one-month blip. Based on the robust sales activity already being logged in December and the fact that under contracts were up by double digits in November, it appears to be more of a blip.
The supply of inventory ticked up to 2.3 months in November from 2.0 months in October. For reference, last year at this time, the supply was 2.2 months.
In the Colorado Springs area, sales volume increased 12.9% on a year-over-year basis in November. The Colorado Springs inventory supply increased to 3.0 months from 2.5 months.
In the spirit of transparency and accountability, let’s review the predictions for 2015 that we made a year ago in the December 2014 version of this newsletter:
Prediction #1 – Sellers’ Market Rolls On in 2015
“The supply of inventory will remain tight, giving sellers the upper hand as buyers compete for a limited supply of move-in ready, market priced listings. Inventory levels will remain well below the six-month benchmark that divides a sellers’ market from a buyers’ market.”
Reality – Inventory has been tight in 2015. We started the year at 2.5 months of supply along the Front Range. In March, the supply fell to a record low of 1.6 months as sales outpaced new listings. Inventory levels ticked up slightly at the end of the summer, but remained in the 1.8 to 2.3 month range through the fall.
So it’s the same story as 2014 – a lack of good listings continues to hold back sales and put upward pressure on prices. The market continues to favor sellers in almost all price categories and geographies, although some luxury markets are beginning to shift toward favoring buyers.
Grade: A This prediction was spot on.
Prediction #2 – More Buyers Drive Up Demand
“Job growth and low interest rates will give consumers, especially first-time homebuyers, the confidence to enter the market. However, those buyers will have to compete for a limited supply of inventory, thwarting many from actually completing a purchase. The end result will be flat to modest increases, in the 0% to 5% range, in the volume of real estate sold in 2015 compared to 2014.”
Reality – Through the end of November, sales volume across all Front Range markets was up 8.1% year-to-date compared to 2014, higher than the 0% to 5% increase we predicted.
Fortunately, job growth was robust this year. Colorado is projected to add over 50,000 jobs in 2015. A year ago, many were predicting that the slow down in the oil and gas sector would cause our housing market to fall, or even crash. However, as we predicted, strong home buyer demand made the housing market resilient enough to push through these headwinds and continue to increase in both volume and home values.
Grade: B+ Not a bad thing to err on the moderate side.
Prediction #3 – Home Values Up 6% to 8%
“Looking ahead to 2015, price increases are accelerating and year-over-year appreciation rates are increasing, not moderating. We expect to see appreciation rates hover in the 6% to 8% range in 2015, with the distinct possibility that annual appreciation will approach 10% this spring…the conditions of low supply and high demand that drive up prices are firmly in place.”
Reality – Home values have increased 12.66% in Colorado according to the latest Federal Housing Finance Agency (FHFA) report. The Core Logic Home Price Index pegs Colorado appreciation at 10.5%. In Colorado Springs, homes values are up 7.00% according to FHFA.
Although lower than actual 2015 appreciation, our prediction of 6% to 8% was quite aggressive at the time. Many so-called experts were predicting much lower appreciation rates. Zillow, for example, predicted annual appreciation of 2% to 4% for 2015 in the major Colorado metro areas. Frankly, the strength of our home value increases caught almost everyone by surprise.
A final note not to be overlooked- Colorado home prices are at all time highs.
Grade: A- Again, not a bad thing to err on the moderate side.
Our overall prediction for 2015 was “a strong real estate market.” And that’s what we got! As a result, we gladly accept a cumulative grade of A minus for our 2015 predictions.
Next month, we’ll make our market predictions for 2016. Sneak peek – a healthy, but more balanced market.
In the mean time, I hope you and yours have a wonderful Holiday Season!