Bargaining Power

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Buyers (finally) have more bargaining power.  For many, many months sellers had the distinct upper-hand and commanded above-list price offers.  Bidding wars were the norm.  Buyers had virtually no negotiating power.The numbers show that the dynamic has absolutely changed.The ratio of the final sales price to the list price is now at 98.1%.From April 2020 to July 2022, the ratio was at or higher than 100%.The peak was in April 2022 at 104.3%.In the span of just a few months, sellers have gone from multiple, over-list price offers to expecting to come off their list price.

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The Big News

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The big news this week is obviously the rise in interest rates.

Average 30-year fixed mortgage rates are now at 6.7% which is the highest they have been since July 2007.

So, how is this affecting the market?  Here is what we notice…

There are fewer buyers in the market.  Sales activity, measured by closed and pending sales, is down 30% compared to last year.

Prices, however, continue to rise.  Average prices are roughly 11% higher than last year.  This is driven by the market being under-supplied.

Inventory levels, as measured by months of supply, tells us we still have a Seller’s market.  There is 2 month’s of supply currently for sale.

Ultimately, we expect the rise in interest rates to slow the pace of price appreciation.  We believe the market will return to its long-term average of 6% per year.

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Price Peek

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Here is a peek at average residential prices along the Front Range through the first half of September and how they have changed versus one year ago:

  • Larimer County = $663,000 up 11.6%
  • Weld County = $511,000 up 4.5%
  • Boulder County = $1,165,000 up 17%
  • Metro Denver = $668,000 up 9%

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The “R” Word

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Our clients wonder what a recession would mean for the real estate market.

Many assume it would translate into a downturn in prices.

Some even worry that it would cause values to come crashing down.

We looked back in history, at past recessions, to gain an understanding of what recessions mean for the Front Range market.

We used the extensive data from the Federal Housing Finance Authority to look at home price appreciation during the five recessions dating back to 1981.

What we found was quite interesting.

During the five recessions of 1981, 1990, 2001, 2008 and 2020, home prices along the Front Range went up in all but the 2008 recession.

What was unique about 2008 was that housing led the recession.  Whereas the other recessions were triggered by some combination of inflation, oil prices, and stock market issues (plus the pandemic in 2020).

So, if the past is an indicator of the future, a recession is not guaranteed to result in lower real estate prices.

The Front Range real estate market has always demonstrated long-term health and a great resiliency to outside economic events.

See the chart below for the detailed research…

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The “R” Word

/in , , , , , , , /by

Our clients wonder what a recession would mean for the real estate market.

Many assume it would translate into a downturn in prices.

Some even worry that it would cause values to come crashing down.

We looked back in history, at past recessions, to gain an understanding of what recessions mean for the Front Range market.

We used the extensive data from the Federal Housing Finance Authority to look at home price appreciation during the five recessions dating back to 1981.

What we found was quite interesting.

During the five recessions of 1981, 1990, 2001, 2008 and 2020, home prices along the Front Range went up in all but the 2008 recession.

What was unique about 2008 was that housing led the recession.  Whereas the other recessions were triggered by some combination of inflation, oil prices, and stock market issues (plus the pandemic in 2020).

So, if the past is an indicator of the future, a recession is not guaranteed to result in lower real estate prices.

The Front Range real estate market has always demonstrated long-term health and a great resiliency to outside economic events.

See the chart below for the detailed research…

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Asking Price Drop

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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.

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What We Notice

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Here is what we notice about the market right now:

  • Listings are receiving fewer offers compared to 60 days ago – instead of 10 offers, a listing might have 2.
  • There are now several instances of a listing only having one offer.
  • Sellers who were overly-aggressive with their list price have to quickly reduce in order to generate activity.
  • Inventory is up and in some areas significantly, giving buyers more options and flexibility.
  • Home buyers who are under contract with a new home waiting for that new home to be built have been negatively impacted by rising rates.
  • More buyers are considering 7 and 10-year mortgage products in order to have a lower interest rate.
  • The pendulum is swinging away from the drastic seller’s market we have seen for the last 18 months.

The post What We Notice appeared first on Fort Collins Real Estate | Fort Collins Homes for Sale & Property Search.

What We Notice

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Here is what we notice about the market right now:

  • Listings are receiving fewer offers compared to 60 days ago – instead of 10 offers, a listing might have 2.
  • There are now several instances of a listing only having one offer.
  • Sellers who were overly-aggressive with their list price have to quickly reduce in order to generate activity.
  • Inventory is up and in some areas significantly, giving buyers more options and flexibility.
  • Home buyers who are under contract with a new home waiting for that new home to be built have been negatively impacted by rising rates.
  • More buyers are considering 7 and 10-year mortgage products in order to have a lower interest rate.
  • The pendulum is swinging away from the drastic seller’s market we have seen for the last 18 months.

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Inventory Bottom

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In Front Range markets, the number of homes for sale has just hit bottom or is about to hit bottom.

This is terrific news for home buyers who have been waiting for more homes to choose from.

The market is shifting, there is no doubt about that.

Prices are still increasing and we expect them to increase, just not at the pace they have been.

The inventory of homes for sale, which has been significantly down for two years, is finally starting to show signs of change.

We have been accustomed to inventory levels being down 30% to 50% compared to the prior year.

That is not the case anymore.

Inventory in Larimer and Weld County is now only down roughly 5% year over year.

Inventory in Metro Denver is now up 13.5% compared to this time in 2021.

We believe this is a legitimate shift in the market, not just a short-term anomaly.

No need to worry about prices crashing or a housing bubble.  There is still too little supply and too much demand for that to happen.

However, the pace of price of appreciation will certainly get back to more normal levels of 5% to 6% per year instead of 20% to 25% per year.

Bottom line, this market shift has been a long time coming and is very good news for buyers.​​​​​​​ 

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Expert Opinion

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This week, take a listen to Matthew Gardner, Windermere’s Chief Economist as he discusses the current state of the housing market.​​​​​​​

 

He takes a deep dive into interest rates, price appreciation and where the market is headed.

 

You can watch his video HERE

 

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