Have you heard of the saying ‘buy low and sell high’? Whether you are investing in the stock market or you are buying real estate, everyone would love to buy low and sell high. I don’t know how many times over the last five years have I heard people say, “If I only knew the real estate bubble was going to be 2006, then I would have sold at the peak of the market. Of course you would… everyone would, but the challenge is knowing when and how to time the market. Many people over the years have professed to me their ability to time the market. It’s pretty difficult to do, but today there are even more economic indicators than ever before.
One of the best leading indicators in real estate is new housing starts. In 2006, new housing starts totaled 1.9 million across the US. That was the all-time high. In 2013, the total new housing starts hit 1.6 million. That’s only 300,000 off the all–time high. Give builders another 12-18 months and they will eclipse the 1.9 million record and will be pushing into 2 million new housing starts. What does that mean for housing prices?
It’s as easy as understanding the law of supply and demand. If builders catch up and start flooding the market with new home inventory, everyone’s prices will either dip or at least level off for the near future. Buyers will have more choices from builder inventory, and as a result will slow home value growth. Besides, we have been down this road once before. It’s not realistic to think that the Denver market will be able to sustain a 10% growth year after year. That’s why we are telling all of our clients that 2014 will be the peak year for home values in Denver. I always reserve the right to be wrong, but this time, there are just too many economic indicators to validate the information above and be a windfall year for sellers.