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A New Change
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.
Months of Supply
As measured by months of supply, we have a strong Seller’s market in Northern Colorado.
Both Larimer County and Weld County measure at 1.6 months of supply.
That means, at the current pace of sales, it would take only about 6 weeks to sell all of the existing homes for sale.
The measurement becomes even more interesting when we look at specific price ranges.
Under $500,000 is 1.0 months in Larimer and 0.9 in Weld.
$500,000 to $700,000 is 1.6 months in Larimer and 2.0 in Weld.
$700,000 to $1,000,000 is 2.0 months in Larimer and 3.0 in Weld.
And, over $1,000,000 is 3.6 months in Larimer and 5.3 in Weld.
We are not surprised to see higher months of inventory in higher price ranges.
It is interesting that even $1,000,000 properties have less than 6 months.
More New
Nationally, new home inventory as a percentage of the total inventory just hit a record high. 26% of all properties currently available for sale are brand new homes.
To put this in perspective, in 2018 it was 14%. From 2000 to 2008 it bounced between 10% and 15%
Locally, we notice even higher numbers.
In Larimer County, 29% of all inventory is brand new. In Weld County, it is a whopping 35%.
The reason why the percentage is high is not so much because of a surge in new construction, but because the amount of re-sale properties listed for sale is so low.
The Front Range has an under-supplied market, especially when it comes to re-sale properties.
Not As Different
Real Estate in the first part of 2023 along the Front Range is certainly different than the first part of 2022. But, in terms of number of transactions, it is not as different as one might guess.
Yes, higher interest rates and lower inventory has caused the number of transactions to be less than last year.
Generally speaking, the number of homes that have sold so far in 2023 is 20% lower than the same time period last year.
This does vary by region. Larimer County is down 15%, Weld County 29% and Metro Denver 21%.
It is important to keep in mind that the first 110 days of 2022 were unprecedented in terms of activity.
Some of the sensationalized media attention on real estate may imply that activity has come to a screeching halt, but that is simply not true.
There is still plenty of demand in the market for real estate on the Front Range.
More Buyers Than Sellers
The real estate market today, quite simply, has more buyers than sellers.
Let’s be clear, this is not the heated market of 2021 and 2022.
However, the market is undersupplied in most price ranges and most locations.
The National Association of Realtors just reported that the number of new listings hitting the market each week has been lower than the same time the previous year for 40 weeks in a row.
There are roughly 20% fewer new listings hitting the market each week versus last year.
The result of low inventory is homes selling quickly in many cases.
Altos Research reports that of the 73,000 listings that have come on the market so far this week Nationally, 25% of those are already under contract- selling within days, if not hours.
Bottom line, the market needs more listings.
Dropping Inventory
Breaking News – months of inventory has dropped significantly signifying an uptick in real estate activity along the Front Range.‘Months of inventory’ is an important statistic and something we commonly talk about in this blog. It simply measures how long it would take to sell all of the homes currently for sale at the current pace of sales.As a reminder, a market is ‘balanced’ when there is four to six months of inventory on the market.During the fast-paced market of June 2020 to June 2022, this statistic dropped to less than one month.During the market cooling of last Winter, it increased to over two months.Now, it is back to nearly one month of supply signaling a clear seller’s market.Of course, all markets are hyper-local and this number can vary based on specific price point and specific location.However, looking at ‘months of inventory’ from a big picture view, offers a good understanding of overall market conditions.Here is what months of inventory is for each Front Range market:Larimer County = 1.3 MonthsWeld County = 1.2 Months Metro Denver = 1.1 Months
No Bear
Altos Research is one of the most trusted sources of real estate market information in the United States. Each week they track every single home for sale across the Country. They analyze the pricing, supply, demand, and status changes for all listings. This amount of data allows them to expertly predict changes in the market.
Their founder, Mike Simonsen, recently said this about the current state of the real estate market:
“The most important thing to take away is that the most bearish scenarios for home prices this year are not taking place. If a buyer is sitting on the sidelines waiting for a home price crash, in general across the country that’s not happening.
“We can measure demand and the direction of future sales prices by looking at the percent of homes on the market with price reductions. This number, frankly, is lower than I would have expected given how few buyers were out in the fall. This a sign that sellers are not panicking and that smart, properly priced listings are getting their offers.”
The annual Market Forecast featuring Chief Economist Matthew Gardner is February 1st at 5:30pm. To see the details and to RSVP, visit www.ColoradoForecast.com
Versus 2019
Because 2021 and 2020 were such unique years in real estate because of the considerably low interest rates, many people in our industry believe it makes sense to compare 2022 to 2019 when looking at the key statistics.
Here’s how 2022 looked along the Front Range compared to 2019:
Prices Number of Transactions Properties for Sale
Larimer County +41% -6% -37%
Weld County +39% +2% -16%
Metro Denver +40% -14% -6%
Generally, what we notice is that:
- Prices are up significantly
- The number of transactions is similar
- Inventory is down compared to 2019 even though it is more than double 2021’s inventory
The annual Market Forecast featuring Chief Economist Matthew Gardner is February 1st at 5:30pm. To see the details and to RSVP, visit www.ColoradoForecast.com
Way Under
The Nation’s real estate market is significantly under-supplied.According to the most recent research from Freddie Mac, the United States has a housing supply deficit of 3.8 million units.The available inventory today is lower than it has ever been in the last 40 years and is 3.5x lower than the peak of 2008.The reason why available inventory is so low, is the low amount of new home starts that have occurred over the last 15 years.Builders have faced many obstacles trying to keep up with housing demand including supply chain issues, labor supply, land availability, water availability, and stricter approval processes.Fewer new homes were built in the decade ending 2018 than any other decade since the 1960’s.The reality is, the obstacles builders face are unlikely to change significantly in the foreseeable future.Low inventory is likely to persist.An under-supplied market is a key reason leading economists do not expect home prices to crash even while the market cools off.
Big Jump
We are seeing a big jump in properties for sale as measured by months of inventory.
As a reminder, a market is considered balanced when there is between 4 and 6 months of inventory on the market. Meaning, at the current pace of sales, it would take 4 to 6 months to sell all of the properties currently for sale.
Inventory one year ago at this time was:
- 1 month in Northern Colorado
- 0.7 months in Metro Denver (3 weeks)
Today the inventory is:
- 2.3 months in Northern Colorado
- 2.3 months in Metro Denver
This represents a:
- 164% increase in Northern Colorado
- 245% increase in Metro Denver
