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Inventory Jump
The most significant trend we notice 45 days into the new year is the jump in inventory.
There are many more properties for sale along the Front Range compared to one year ago.
- Larimer County is up 40%
- Weld County is up 39%
- Metro Denver is up 35%
This comes as welcome news for buyers as we near the Spring buying season.
Toward Balance
Our market is moving toward a balanced market, but it is still unbalanced.
By definition, a balanced market has between 4 and 6 months of inventory for sale.
Today there is essentially two months. One year ago, there was only 3 weeks of inventory.
It has actually been 16 years since the market has been in balance.
So, while we still have a ways to go before it is balanced, it is moving that way.
Like 1993
Here’s a trivia question…
The number of new, single-family homes completed in 2022 will most closely resemble which prior year?
If you guessed 1993, you are correct.
Yes, the number of homes built and completed this year is no more than the number from 30 years ago.
In 2022, there will be just over 1 million single family homes constructed in the U.S. which is the same as 1993.
This is much more than the bottom of construction in 2011 which saw just under 500,000 new homes built.
But it is also much less than the top of 2006 which had almost 1.7 million.
Limited new home construction today is preventing anything close to a glut of inventory on the market which, in turn, insulates us from any sort of major price correction.
Asking Price Drop
Data just released by Altos Research shows that 35% of all homes on the market have had to reduce their asking price.
This is the highest this number has been since December of 2019.
This is also an indicator of sellers adjusting to the reality of the new market where overly aggressive pricing is not effective.
Extensive research shows the importance of pricing a home correctly on the first day so that the home sells in an appropriate time frame.
More Days
A stat that we have expected to change is finally changing.
“Days on Market” measures how long it takes for new listings to sell.
Over the last two years this stat plummeted to levels we have never seen before.
In the height of the market frenzy a year ago, properties were taking 7 days or less to sell on average.
Now, with the market cooling, Days on Market is back into double-digits.
Northern Colorado is at 20 days, a 54% increase over last year.
Metro Denver is at 12 days which is a 50% increase.
Two Week Snapshot
Here is a quick snapshot of our markets two weeks into July versus the same time last year…
Larimer & Weld Counties:
- Inventory up 61%
- Transaction count down 44%
- Prices up 17%
Metro Denver:
- Inventory up 62%
- Transaction count down 31%
- Prices up 12%
Weeks to Months
For the first time in almost two years, there is more than a month’s worth of inventory on the market.
This means that at the current pace of sales, it would take more than a month to sell all of the homes currently for sale.
This is certainly welcome news for buyers who have been craving a less frenzied market.
Since the market took off in the summer of 2020, inventory levels have been measured in terms of weeks.
Two to three weeks of inventory was the typical measurement for the last two years.
Today, inventory levels look like this:
- Larimer County = 1.1 months
- Weld County = 1.2 months
- Metro Denver = 1.2 months
Rate Perspective
Given the recent increase in mortgage interest rates, we think a little perspective is in order.
- The average 30-year rate for the last 40+ years is 7.5%
- Rates are now back within the range where they were between April 2018 and February 2019
- Between January 2000 and December 2009, the high was 8.15% and the low was 5.05%
- Between January 1990 and December 1999, rates never went below 6.25%
Bottom line, while the increase in rates is challenging for active buyers, rates are still incredibly low historically speaking.
Money at a Discount
This week, for the first time in 32 months, mortgage rates hit 4%.
While this increase may feel painful for buyers currently looking at property, it is important to put today’s rates in perspective.
We believe we will look back a few years from now and see that a 4% rate was like buying money at a discount.
Interest rates hovered between 4.5% and 3.75% for the 8-year span of June, 2011 to June 2018
Between January, 2000 and December, 2010 rates were as high as 8.25% and as low as 5.0%.
When looking at the history of interest rates and researching economists’ forecasts, we believe it is reasonable for rates to hit 5% within the next 24 months.
When interest rates increase 1%, a buyer’s monthly payment increases 10%.
So, if rates do go to 5%, it is like an additional 10% price increase for a buyer.
Given all of this information, we believe the biggest risk to a buyer in today’s market is to wait.
Mortgage rates are likely on their way up and there is an opportunity to buy money at a discount today.
Multigenerational Real Estate Trends
When making an important decision like buying a new home, personal circumstances are often a driving force. Whether you are a first-time homebuyer, need more space for your growing family, downsizing to fit an empty nest, or looking for a retirement property, finding the right information, the right real estate agent, and the right properties that fit your needs are all important parts of that process. Based on recent studies by the National Association of REALTORS® on generational trends, we can identify the best resources to help you in any phase of your life.
Among all generations, the first step most buyers take when searching for a home is online. Younger generations tend to find the home they eventually purchase online, while older generations generally find the home they purchase through their real estate agent.
Across generations, home ownership still represents a significant step in achieving the American Dream. According to a study by LearnVest, an online financial resource, 77 percent of those surveyed believed that buying a home of their own was, “first and foremost in achieving the American Dream”.
Millennials:
1980-2000
Also known as Generation Y or the Echo Boomers because this generation almost equals the baby boomers in population. This age group is the second largest group of recent homebuyers, representing 28 percent according to the National Association of REALTORS . Seventy nine percent of homebuyers in this age are purchasing their first home. According to the 2012 Trulia American Dream Study, ninety three percent of renters in this generation plan on purchasing a home someday.
When considering a home purchase, Millennials (and some Generation X buyers) place a high value on convenience to work, affordability, and the quality of school district. This generation is the most likely to choose an urban center as the location of their first home. According to market research by Gfk Roper, this group is most interested in their home being a social hub, with a focus on entertainment and amenities.
When looking for a real estate agent, Millennials are most likely to looks to friends and family for a referral. They generally place a high value on an agent’s honesty and trustworthiness because they are often relying on their agent to walk them through the home purchase process for the first time.
Generation X:
1965-1979
As the largest group of recent homebuyers, the LearnVest findings suggest that 72 percent of Americans in this generation are already homeowners. They also represent the largest group of home sellers, with a substantial percentage of the group looking to upgrade their home to accommodate their growing families or increase investment. Experts in the real estate industry expect this group to lead in the recovered real estate market.
Generation X households are more likely to have a dual income, with both adult members in the household working. According to a study by GfK Roper, a market research company, this generation placed state-of-the-art kitchens at the top of their priorities, as well as large closets and amenities for organization, since many Gen Xers have children living in their homes. They are less concerned about formality in their home and have less interest in formal dining and living rooms.
Baby Boomers:
1946-1964
Interestingly enough, the NAR study finds that as the age of the homebuyer increases, the age of the home being purchased declines. Baby boomers and older buyers are looking for newer construction, with less need for renovations or large maintenance issues. This generation ranks state-of-the-art kitchens, whirlpool baths, walk-in closets, and hobby spaces high on their list of must-haves, according to GfK Roper.
The boomer generation is also looking to the future for both themselves and their aging parents, “fourteen percent of homebuyers over the age of 48 are looking to purchase senior-related homes, for themselves or others” according to the NAR study. Boomer parents are becoming accustomed to (or preparing for) an empty nest, so this group may be downsizing or looking for a home that specifically fits their needs.
Silent Generation:
1925-1945
This generation of buyers places a bigger emphasis on finding a home closer to friends, family, and health facilities. While this generation uses the Internet to find their home in the early stages of a home search, they work more directly with a trusted real estate agent to find the home that specifically fits their needs. A home purchase for members of this generation will likely not be a first-time experience so they are less willing to compromise on the price, size, or condition of a home. This generation is generally more satisfied with the homebuying and selling process because they have been through it before and know what to expect. According to the Trulia American Dream study, this group is also most likely to have realistic assumptions about the cost of a home and mortgage.
For more information on Windermere Evergreen please contact us here.
