December Market Update and Year End Review
The close of December brought the end to a year that no one could have expected. The month ended similar to the whole of 2020, with record-low inventory and record-high sales volume. December ended with 2,541 active listings on the market and while it is common to see lower inventory in December, the previous low was 3,415 and that was just this past November. While the stats for December are record-breaking, they aren’t a surprising end to 2020.
Many industry experts anticipated a recession in 2020, and what actually happened was much more complicated. After what was effectively an economic standstill in March, the real estate market reopened and went on to break just about every record. Demand for detached homes was at an all-time high, while attached home sales took some more time to recover. The continued influx of homebuyers to Colorado shrunk the already slim inventory even further. While inventory felt low, inventory was actually markedly higher than in 2019. 24% more homes sold in Denver in 2020 over 2019 and this resulted in the most homes ever sold in a year in Denver at 62,985.
We credit this strong recovery to the overall healthy economy of Colorado. The state has recovered impressively in such a short time with 80% of lost jobs returning before year-end. The strong economy and market can also be attributed to the demographics of people both living and moving to our state. Millennials are the largest cohort of homebuyers and we are seeing millennials flock to Colorado for the companies that are headquartered here and with expanded telecommuting opportunities. This surge of people has not only affected the Denver market, but also our neighboring cities and mountain communities. Sales in nearby ski towns have skyrocketed and places like Eagle and Summit Counties are seeing significant year over year, sales price increases, 21%, and 24% respectively.
One thing working in favor of buyers is interest rates. Even though home values have increased by 14% in Colorado, rates are so much lower than homes are actually more affordable. The low-interest rates allow buyers to borrow more money for similar or lower monthly payments. Signs from the Fed suggest that we can expect these low rates to continue for at least another year.
We predict that the increased distribution of the Coronavirus vaccine will fuel the current trends. Inventory will remain a huge factor in the market, but buyers will shift their searches to include attached homes once again. The condo market will still face a slower start, but competitive pricing will make them more desirable to buyers who are priced out of detached products and those that are looking forward to enjoying the full amenities that these buildings often offer. We also expect the high prices and high demand for Denver homes to influence the surrounding suburbs as telecommuting allows employees to move further away from main offices. We expect competitive situations on appropriately priced homes to be commonplace and many transactions to include waived inspection rights, appraisal gaps, and bidding wars.
Lastly, there is no data that leads us to believe that this is the top of the market. New homebuyers are flocking to the state and inventory remains tight. Having a skilled, experienced, and creative Realtor remains one of the biggest advantages for buyers and sellers. The market is no doubt competitive, but at the end of the day, there are deals to be made and having the best team in your corner makes all the difference.