A bellwether is defined as an indicator of trends, derived from the lead sheep in a flock that wore a bell around its neck. Historically in real estate, March is a bellwether month. March is when we get a much clearer view of the market dynamics in play and what we can expect to see in the most active months of spring and summer that lie ahead. So goes March, so goes the year.
Case in point, in March of 2014, sales volume fell by 5.4% on a year-over-year basis across all Front Range markets. The market continued to struggle with a lack of listings through the summer of 2014, ending the year with a meager gain of 3.7% in volume over 2013.
In 2013, March proved equally prescient, although that year, March signaled a strong market. Sales volume increased 30% year-over-year in March 2013, and at year-end, the market had posted a 26% gain for the entire year over 2012.
So what do the March numbers tell us this year? Loud and clear, they tell us that this year will be a robust market of increasing sales and higher prices, despite the systemic inventory shortages. Specifically, the volume of real estate sold across all Front Range markets in March increased 22.5% compared to March 2014. The inventory of homes for sale grew even tighter, dropping to 1.6 months of supply, clearly indicating a market that favors sellers.
In the Denver proper market, sales volume increased 17.0% on a year-over-year basis in March. The supply of available homes in Denver County fell to 0.9 months as the number of new listings did not keep pace with the uptick in sales.
Based on these results, it’s a pretty safe bet to predict that sales volumes will continue to post year-over-year gains of 20% to 30% as the months unfold. The market, or more accurately the buyers, sellers, and the agents helping them, appear to be figuring out ways to navigate our inventory shortage and close transactions.
A few things in particular are helping. The number of new listings coming on the market is increasing. In March, new listings were up 36.1% over February, in line with typical seasonal patterns. Perhaps more telling, new listings were also up 1.7% on a year-over-year basis. Not much, but moving in the right direction. Of course, the number of sales is also increasing, and at an even faster pace, but for active buyers, it sure helps to see new listings, even if they are immediately snapped up.
Another factor worth noting that is helping “unstick” the market is the extended rent-back. Rent-backs, or lease-backs, allow sellers to remain in their homes after closing for up to six months or more while they find a replacement home. Rent-backs are giving folks the confidence to list their home for sale and know they won’t be homeless after closing.
This is not an easy market. It requires skill, on both the buy side and the sell side (remember: anyone can sell a house, but can they maximize sales price and terms?). Our Realtors will continue to do their very best to bring buyers and sellers together to achieve mutually beneficial objectives within the constraints of the market. Please let us know if we can help you navigate this market. It’s what we do.