Temperatures may be cooling off but the Front Range real estate market is not.
Typically the market starts to slow down a bit in the Fall after a hot Spring and Summer.
Not this year.
The indicator we use to measure future closed sales is current pending sales.
Simply, we look at the number of properties under contract and scheduled to close versus the same time last year.
Current pending sales are way up along the Front Range when measured against 2019:
Metro Denver up 34.1%
Larimer County up 48.6%
Weld County up 50.2%
Based on these numbers, closed sales numbers over the next 60 days will be very strong.
The number of loans in forbearance just fell to their lowest level since mid-April.
This is good news for the real estate market.
Less and less people are seeking payment relief on their mortgages.
The number of loans currently in forbearance stands at 7.16%.
This news coincides with the U.S. Unemployment Rate falling to it’s lowest level in 5 months as more people are getting their jobs back.
The economy has added back roughly half of the 22.2 million jobs that were lost in March and April of this year.
Sales of new homes have jumped to their highest levels in 14 years.
The annualized rate of single-family new construction homes is now at 901,000 according to the new Census Bureau report.
This means that across the U.S., at the current pace of sales, there will be almost 1,000,000 new homes built and sold over the next 12 months.
This pace is 36% higher than one year ago and the highest it has been since the end of 2006.
Given the low inventory levels of previously-owned homes that most of the Country is experiencing, this uptick in new home activity is welcome news.
The Federal Housing Finance Authority just released their most recent quarterly report which tracks home price appreciation in the top 100 metropolitan areas in the U.S. plus appreciation in individual states.
Some significant findings from the report:
House prices have risen for 36 consecutive quarters, or since September 2011.
House prices rose in all 50 states and the District of Columbia between the second quarters of 2019 and 2020.
The top five areas for annual appreciation were:
1) Idaho 10.8%
2) Arizona 9.1%
3) Washington 8.6%
4) Utah 8.1%
5) New Mexico 7.7%.
Idaho has been the leading state for the last 7 quarters.
Colorado showed annual appreciation of 4.4%.
The areas showing the lowest annual appreciation were:
1) West Virginia 1.1%
2) North Dakota 1.1%
3) District of Columbia 1.4%
4) Illinois 2.5%
5) Alaska 2.6%.
House prices rose in 99 of the top 100 largest metropolitan areas in the U.S. over the last four quarters.
Annual price increases were greatest in Honolulu, HI, where prices increased by 11.7%.
Prices were weakest in San Francisco, where they decreased by 0.3%.
Periodically we track a stat which we find to be quite interesting.
It answers this question – how many properties are selling for at least list price (asking price or higher)?
This stat tells us how active the market is and helps our buyers to realize that, in some cases, they will be in a competitive situation.
When we look at single-family home sales so far this month, this is what we find:
- 57% of properties in Larimer County sell for at least list price
- 62% of properties in Weld County sell for at least list price
So, in well over half of the transactions, buyers need to offer list price or higher to acquire the property.
The data gets even more interesting when this information is broken out by price range.
To no one’s surprise, the percentage increases for properties priced under $400,000:
- 81% in Larimer County
- 70% in Weld County
We find that for properties over $400,000 the percentages still tell a story of a very active market:
- 47% in Larimer County
- 56% in Weld County
Bottom line, in most locations and price ranges we see a strong sellers’ market where buyers need to be prepared to make a strong offer and to also compete.
The Case-Shiller Home Price Index tracks appreciation in the 20 largest real estate markets across the U.S.
Their most recent quarterly report was just released this week.
Metro Denver prices are up over last year by 3.89% which is just slightly higher than the average of the 20 markets.
It is interesting to see how the 20 locations have performed since the pre-Great Recession housing peak.
Turns out that Denver has done the best out of all the markets.
Since 2008, Denver home prices have appreciated 64.9%. Second-best is Dallas at 55.5% and Seattle is third at 41.2%.
Believe it or not, there are markets where average home prices have still not returned to their 2008 levels.
Las Vegas is 14.5% below 2008 and Chicago is 12.8% below.
These numbers are another indicator of the long-term health and performance of the Front Range market.
This year the Spring market is occurring in the Summer.
Typically the busiest months for real estate along the Front Range are April, May and June.
This year, because showing activity was restricted in the Spring months, we are seeing robust activity this Summer.
Here’s an indicator. Sales through July 2020 versus July 2019 are up:
- 12.6% in Metro Denver
- 17% in Northern Colorado
To see double-digit increases in sales despite was is occurring in the National economy, is nothing short of remarkable.
New research from the National Association of Home Builders:
The number of Americans contemplating purchasing a home in the second quarter of 2020 is nearly the same as 2019’s second quarter, according to NAHB’s Housing Trends Report.
At this time last year, 12% of Americans considered buying a home. Today the number stands at 11%.
The same goes for first-time prospective buyers, where 58% considered buying a home in the second quarter of 2019 and 59% are considering it in 2020’s second quarter.
In the second quarter of 2020, Millennials are the generation most likely to want to buy a home (19%), even slightly higher than a year earlier (17%).
Boomers, on the other hand, are the least likely, with the share planning a home purchase falling from 7% to 5%.
Across regions, the share of respondents who are prospective home buyers is unchanged in the Northeast (10%) and South (12%), essentially flat in the West (13%), and just slightly lower in the Midwest (down from 11% to 9%
It’s interesting to look at what population growth means for housing.
On average, along the Front Range, 2.5 people live in each housing unit.
What that means is 4 housing units are needed for every 10 people who live here.
So, for every 1000 new people moving to our area, 400 new housing units are required.
The population of Metro Denver is just under 3,000,000 and the population of Northern Colorado is just over 650,000.
Assuming the Front Range grows in population at 2% per year, that means 60,000 new people in Metro Denver and 13,000 new people in Northern Colorado each year.
To house those people, 24,000 new housing units need to be built per year in Metro Denver and 5,200 in Northern Colorado
The market is in short supply.
More homes are needed to fulfill the need to buyer demand.
Compared to exactly one year ago, the supply of homes is down:
- 32.6% in Metro Denver
- 25.1% in Northern Colorado
An interesting and useful measurement we track is months of inventory. This stat tells how long it would take to sell all of the homes currently for sale at the current pace of sales.
Of course, months of supply can vary greatly by price range and location. However, this stat does a good job of explaining the overall state of the market.
Specifically, months of supply tells us if the market is in balance.
A ‘balanced’ market is when there is 4 to 6 months of supply. A buyers market occurs when the stat is higher than this range. A sellers market occurs when it is lower.
The months of supply looks like this in our market:
- 1.0 months in Metro Denver
- 1.3 months in Northern Colorado
So, the market overall is significantly under-supplied and more homes are needed to meet demand.