Happy Real Estate New Year

Ok, it’s that time of year again to rub my crystal ball and foretell the coming year in real estate. I should disclose that I am not a professional crystal ball reader so take this interpretation for what it’s worth (totally free, unscientific guess).

First, it’s important to note (like you don’t already know) that this is an election year and that means nothing will be normal. If we look back at past election years, we see people being very conservative, playing it close to the vest, not making any big decisions or purchases until they know whom their elected officials will be. I would expect more of the same this year. The exception will be people that have to buy, like those who are having a job relocation, or people that have to sell because of economic distress. Denver may be insulated from some of this because of our extremely low inventory, and our local economy is better than most parts of the country.

Since Denver Real Estate did so well in 2011, there is a chance that it could continue to 2012. If it doesn’t happen, I would expect Colorado to match the rest of the country, which seems to be bumping along the bottom. There will be spikes followed by lows in sales, very much like riding a mini roller coaster (no real peaks and no real valleys).

The better way to analyze the New Year is by breaking it down by price point. The lower range up to 300K will be very competitive. The low inventory will not only stabilize prices; they’ll likely increase. The very upper end of Luxury will still have more pain. There is more inventory that needs to get bought up or come off the market before we see stable pricing here. The middle range of 400K-800K may be the toughest home to sell and I’ll explain why in next week’s column.

The most optimistic factor we can point to for 2012 is interest rates. Nothing affects the monthly payment of a home more than interest rates. In fact, I found out just the other day that my parents bought our first home in 1969 at 4.5%. I am not sure how many people realize that they can buy a home today at rates below our parents’! Combine low prices along with low interest rates and there still has never been a better time to buy a home.

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