Photo of a new construction home in Louisville, Kentucky
New construction continues to ramp up in 2015, but that wasn’t the biggest story of the year. Not even close. | Photo by Tre Pryor

Good day, good people! It’s that time of year again to stop, take a look back and see how our Louisville real estate market has performed during 2015.

It’s been a banner year, well … almost, sorta, kinda. Here, let me explain.

Home Sales Almost Break the Record

Before the year began, there were two camps predicting what would happen. On the one hand, since the recession, sales activity had largely improved. With interest rates still at historically low levels, one side thought this trend would continue.

The other, let’s call them the “pessimistic camp,” saw that after improving in 2012 and 2013, the following year didn’t follow suit. Using a sports metaphor, 2014 dropped the ball. Could the real estate market actually be moving lower?

Now that 2015 is almost complete, the glass half full people were right! It turned out to be a great year for home sales — in fact, it was almost the best of all time.

Chart of Jefferson County Home Sales (January through November) from 2002 to 2015..
Look at the dip that occurred in 2014. Some thought we could have had even fewer homes sold this year, but these prognosticators were wrong.

With 10,371 properties sold in Jefferson County through November, 2015 should top 11,000 but fall short of the record 11,439 sold back in 2005.

Louisville Home Values Move Higher

Historically, Louisville homes appreciate about 4 percent annually. Of course, there are exceptions for location and home condition, but we’re about as steady as Old Faithful.

When the housing recession hit, one valuation method showed Louisville properties lost roughly 6 percent of their value over the three-year span. Since then, the market has been working to gain lost ground.

In our 2013 review, we saw Area 3 (St. Matthews and its surrounding neighborhoods) gain the most value. The following year saw big gains Downtown and in Area 4 (Pleasure Ridge Park).

That brings us to this year.

Chart of Change in 1 year Home Value Average in Louisville, KY for 2015
There was solid improvement in home values almost across the board as you can see from this chart above.

During 2015, most areas saw incredible growth in home sales prices. Four areas were into double-digit growth!

Area20142015Change
Spencer County$166,727.08$197,082.7518.21%
Oldham County South$219,339.42$247,954.1713.05%
Area 5$92,579.17$102,966.6711.22%
Oldham County North$263,763.33$290,838.5810.26%
Bullitt County$138,189.08$151,554.179.67%
Shelby County$160,058.08$173,868.178.63%
Area 9$215,982.42$232,929.177.85%
Area 4$89,025.00$95,983.337.82%
Area 2$164,050.00$173,160.425.55%
Area 6$119,600.00$124,754.174.31%
Area 7$154,887.92$160,329.503.51%
Area 8$250,082.58$256,744.922.66%
Area 1$34,511.58$34,779.330.78%
Area 3$227,729.17$222,987.50-2.08%
Area 0$138,482.33$109,104.25-21.21%

Data was compiled with a 12-month trailing average of the median home sales price for each month. If you’re interested in the areas, look at this Louisville MLS Areas Map. Source: Greater Louisville Association of Realtors

One clarification — in years past, I only compared the single median value against its counterpart a year earlier. This allowed for greater volatility.

For our IL 2015 Real Estate Year in Review, I used the trend-line value built with 12 data points contributing to a new average. That might sound confusing, but it’s really a more reliable reflection of the sold properties for each area.

Area 3, our big winner in 2013, was one of the poorest performers here. Area 0 has such a low sample size, it’s hard to put much weight in this outcome.

But look at all the amazing growth for Area 5 (Fairdale), with both portions of Oldham County and Spencer County leading the way with a tremendous 18.21 percent gain for the year!

Lack of Home Inventory

One of the biggest stories of the year has to be the lack of real estate inventory. An absorption rate of six months is considered a balanced market.

Back in November 2014, our absorption rate was 5.01 months. This was still below the target. Fast-forward 12 months and for November 2015, Louisville has dropped to a scary 3.68 months.

This is a real estate market where the sellers should be calling the shots.

In November 2014, there were 4,202 active listings. Last month, there were just 3,371. That’s a -19.8 percent decline in Louisville real estate inventory.

Just think what high mark the 2015 real estate market could have reached if there were more homes available to sell to active buyers.

Mortgage Interest Rates

It’s important to note experts have predicted that the federal rate was going to increase as far back as 2010. Obviously, that didn’t happen.

Then it didn’t happen in 2011, 2012, 2013 or even last year.

Due to the incredible sluggishness of the U.S. economy, it wasn’t until this very month that interest rates were increased a quarter of a percent. If you sat on the sidelines these past five years, please kick yourself once, maybe twice.

Those of you who took advantage of these historically low rates, you may pat yourself on the back, knowing you’re saving money each time you pay that monthly mortgage.

Going forward, experts are predicting rates will increase further by small increments, so there’s still opportunity ahead.

Tre Pryor

Tre Pryor

Tre Pryor is an Internet-veteran turned tech-savvy Louisville Realtor with ReMax Champions. Mr. Pryor is the recognized Louisville real estate expert writing for both InsiderLouisville.com and the #1 real estate blog in the city--LouisvilleHomesBlog.com. Most of all, Tre is a trustworthy professional who wants you to see your dreams fulfilled!