Most Surprising News

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The most surprising piece of news for our friends and clients is that prices are essentially flat compared to last year.  People find that surprising given what interest rates have done over the last 18 months.  They wonder, how could prices not fall significantly after interest rates jumped considerably? 

The answer is the fundamental economic lesson of supply and demand.

There is enough demand in the market for the current supply to keep prices stable even in an environment of higher rates.

Now that rates are (finally) trending down, it gives us even more confidence about the continued growth of real estate prices along the Front Range.

Here is a look at how home prices compare to one year ago:

Larimer County = Down 0.8%

Weld County = Up 3.4%

Metro Denver = Up 0.8%

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A Rate-Induced Pop

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The recent drop in mortgage rates triggered a measurable uptick in sales activity.

So far through the first 10 days of November, pending activity in Northern Colorado is up versus the same 10 days last year.

This is despite interest rates being higher than they were last year.

Mortgage rates just had their biggest one-week drop in over a year and buyers clearly responded.

Pending sales through November so far are up versus last year:

48% in Larimer County

20% in Weld County

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Ups and Downs

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Here is a look at how the market performed in August versus August 2022

 

Prices:

Larimer County Up 4%

Weld County Up 8%

Metro Denver Up 6%

 

Transactions:

Larimer County Down 18%

Weld County Down 31%

Metro Denver Down 15%

 

Inventory:

Larimer County Up 18%

Weld County No Change

Metro Denver Down 4%

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Higher Better

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The higher-end market in Northern Colorado, in terms of number of closings, is faring better than the overall market.

When we look at the number of homes selling today and the price point of those homes, properties priced above $1,000,000 are performing better than the market as a whole.

The number of closings occurring now compared to this same time last year is down 30% overall.  But, the high-end market is only down 19%.

When we look further back in time, the data gets even more interesting.

Compared to 2021, Closings today are down 55% overall, but high-end sales are up 26%.

And compared to 2020, there are 59% fewer closings and 160% more high-end sales.

We believe there are two reasons for this dynamic.

First, because of price increases over the last few years, the stock of inventory today includes more $1,000,000- plus homes than the past.

Second, the high-end buyer is less affected by higher interest rates than the general population.  And, certainly less affected than first-time buyers.

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Year to Date

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Here is an interesting look at the market year to date versus the same time period in 2022.

Bottom line, the number of transactions is down considerably, and prices are flat to slightly down.

Larimer County = Sales down 17.5%, prices up 0.7%

Weld County = Sales down 29.6%, prices down 2.2%

Metro Denver = Sales down 22.4%, prices down 2.9%

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Year to Date

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Here is an interesting look at the market year to date versus the same time period in 2022.

Bottom line, the number of transactions is down considerably, and prices are flat to slightly down.

Larimer County = Sales down 17.5%, prices up 0.7%

Weld County = Sales down 29.6%, prices down 2.2%

Metro Denver = Sales down 22.4%, prices down 2.9%

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The Listing Solstice

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Wednesday marked the first official day of summer and the longest day of the year.

Coincidentally, the research shows us that listings are taking far longer to sell than one year ago.

Specifically, days on market has increased by the following amounts in our market versus exactly one year ago:

 

Larimer County: 210%

Weld County: 100%

Metro Denver: 122%

 

Even though days on market is up significantly over one year ago, properties are selling faster on average than what is considered ‘normal.’

Over the last 10 years, average days on market has been between 70 and 50 days. So, while properties are taking longer to sell versus the market of one year ago, they are still selling much faster than normal.

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A New Change

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There is a new type of change to be prepared for.

One interesting way to track the market is to measure the year-over-year difference in inventory.

Quite simply, this looks at how many homes are available today versus the same time one year ago.

For the past several months in a row, the difference as measured by percentage change, has been significant.

That is because inventory levels between May of 2020 and May of 2022 were rock-bottom low.

For example, inventory in March of this year was up over 120% compared to March 2022.

When measured against historical numbers, inventory in the first half of this year is incredibly low.  But, when measured against the first half of 2022, inventory is significantly higher.

Well, that is about to change because inventory increased in June and July of 2022.

So, now when we look at inventory levels versus a year ago, the percentage change will be more modest.

For example, Northern Colorado inventory today is up only 8% compared to one year ago.

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Steady Stream

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Despite the extraordinarily low amount of standing inventory, it is important to understand there is still a steady stream of new inventory hitting the market.

Inventory is low. That is a reality.

New inventory is coming on the market at essentially the same pace as compared to the last few years. That is also a reality.

Because demand is so high, the inventory doesn’t stay on the market very long.  Residential listings go from ‘Active’ to ‘Pending’ very quickly (assuming they are priced correctly).

Over the course of 2021, there were 66,308 new residential listings that hit the market in Metro Denver.  That is only 5% less than 2020.

Larimer County had 8,342 which is 7% less than 2020.

Weld County had 8,499 which is 5% less than 2020.

While standing inventory is near 50% lower than last year, the stream of new inventory is fairly consistent.

It is time to register for our annual Market Forecast with Chief Economist Matthew Gardner. This year the event will be hosted online on Thursday February 3rd from 11:00 to 12:00.

You can register at www.ColoradoForecast.com

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