Happy 2019 to all of you! I hope you were able to enjoy the holidays with your family and loved ones, as 2018 seemed to come and go with a blink of an eye. The weather has been pretty mild from what I can remember in years past too, so as long as it doesn’t impact our water this summer I’m not complaining one bit! Let’s jump in and see what’s been happening since our last update:
Denver Metro Area Home Report: December
In our last update in October, the active listings in the Denver market were sitting at 8,807 homes for sale. As of the end of December, active listings were sitting at 5,577 homes or about 36% less from the end of September which is typical as we head into the holiday months. As I eluded to in the last update, we are starting to see higher inventory levels over prior years which may be pointing to some signs of the market leveling off some. In December of 2017, we actually set an all-time record for lowest level of homes for sale which was 3,854 homes that were active. Fast forward 12 months and we are sitting at 44% more homes for sale, but don’t let that statistic entirely fool you as we are still well below historical norms which we’ll see here in a moment. Recent stock market volatility in the 4th quarter probably dampened some of the activity as well, although it does appear the Federal Reserve may be prepared to pause on the rate increases for the short term which will help out buyers looking for financing. Of the current active inventory, only 30% of those homes are valued at $400k or less so I think we will still be seeing a lot of activity in that price range this Spring as that has been the trend for some time now. Where the price reductions are really starting to have an impact are in the higher priced homes. Many of the real estate economists are predicting another active buying season this Spring, so I think a lot will depend on how interest rates level out along with sellers keeping realistic pricing expectations when selling their home and whether the economy will be able to maintain its strength.
Here are also some other interesting tidbits of information worth looking at from the recent DMAR newsletter:
- The average number of listings at the end of December historically (1985-2017) sits at 13,403 homes, so we are still way below historical norms for a more traditional market that is in equilibrium. While we are finally starting to tick higher, we still have a ways to go to catch up to more traditional inventory levels.
- The 30 year interest rate on a mortgage is sitting around 5% and with the recent stock market uptick and the Federal Reserve signaling they may pause for the time being is helping to keep rates in check for now. Interest rates are still well below their historical norms as well, so this shouldn’t scare buyers away from purchasing a home. It does signal that with the big price increases in home values over the last few years there will definitely be a tug of war going on with pricing and higher rates.
- While the stock market is up for the year, the S&P 500 is still down 11% from the September 20th high. The bottom of the market drop appears to have hit on Christmas Eve. The reason I like to keep an eye on the stock market besides my prior days as a stock broker is the stock market tends to be a leading economic indicator, so I think it’s worth paying attention to the markets to help guide us with sound real estate decisions going forward.
- Home are taking longer to sell in this changing environment, but as long as you have realistic expectations set with selling your home there is no reason to believe you will not get the price you want, it will just require a little more patience.
- There are now more buyers qualifying for homes, so this should help as we enter into the busy season with keeping activity strong.
What should we be taking away from this update? While higher inventory levels will help take some of the pressure off buyers and help level off the market especially in the higher end price range, we still have a competitive marketplace in the $400k and lower range. Having a good agent like myself in your corner will be key to help in getting a strong deal put together that will out compete any other offers if it gets into a competitive situation. As the inventory levels continue to tick up, this should certainly have an impact on leveling out the marketplace going forward.