After several years in the doldrums, 2013 residential home sales in Northern Colorado broke out in a big way setting all time record levels for homes sold, average price and total volume. The table compares 2013 sales with 2012. The 10,923 closed sales were a 17.4% increase over the previous year, the average selling price of $254,509 was a 7.1% increase and the total volume of $2.78 billion is a huge 25.8% increase.
All three areas were fairly close with double digit sales increases and it is good to note that this was done without a double digit increase in home prices that was the result of sharply increased sales in many other areas of the country.
The chart below shows the home sales and total volume from 2000 to 2013. The 2013 sales of 10,923 homes topped the previous record of 10,845 set in 2004, the average selling price of $254,509 is the highest ever and the resulting total volume of $2.78 billion is a 9.8% increase over the previous record set in 2005.
One thing we can be thankful for is the relative stability of the average selling price which reached a peak of $240,354 in 2006 and then dropped 10.5% over the next three years bottoming out in 2009 at $213,784. Since then the average price has increased each year to the current $254,509. This 19.1% increase over four years is less than 5% per year and the price is now just 5.9% above the level of 2006. This is a very sustainable level of price increase.
Not only was the pricing held in check in spite of record demand but it was accomplished with an extremely limited inventory of homes for sale. For most of the year buyers faced a two month supply, well short of the six months which is considered a balanced market. At the end of 2013 there were 1,773 homes listed for sale and with a monthly demand of 900 homes the current supply is less than two months. To show how far out of balance we are, a six month supply of homes would be 5,400!
One of the reasons for the low inventory is the lack of new home construction. From 2001 to 2006, new construction accounted for 25% to 30% of all home sales in Northern Colorado. This dropped to near 10% several years ago and the 1,721 new homes sold in 2013 represents just 15.8% of the total sales. We estimate that we need construction of 2,500 to 3,000 new homes per year to meet the current demand.
All the signs point to a continued robust demand for homes but we will be hard pressed to find 11,000 homes to sell this year without a big improvement in the supply of new homes. Add a further 7% increase in the average selling price which puts Larimer County in the $300,000 range and Weld County at $240,000 (when it was $190,000 just two years ago). All told; the low inventory, rising selling prices and the expected increase in mortgage rates might combine to put a damper on home sales. Stay tuned!
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