NEWS RELEASE
FIRST AMERICAN TITLE
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The other day, I heard a realtor blame low real estate sales volume on the rainy weather. She said the rainy, dreary weather has slowed buyer enthusiasm and kept them from going out to look at and buy homes. While I wanted to laugh, she had a point that buyer sentiment is a large part of the motivation to purchase a home. I think there are bigger issues she’s ignoring by making this statement. To make her statement true, we’d have to ignore 6.5%-7.0% interest rates, historically low inventory and historically high home prices… probably a long list of other items too, but these are the most important factors impacting buyer sentiment… not the weather.
Buyer sentiment can be adversely affected by the numbers in a stats report like this. When results aren’t as rosy as in the past few years and when some media regularly cherry-pick certain numbers, things can start to look really bad. We’ll go over a couple examples later. In the meantime, we are going to look at the bigger picture to put things in perspective. Also, we’ll review a prediction I made that still has a slim chance of happening, but the door is surely closing.
I’ve made a number of predictions over the past 15 years of writing this monthly report. I’ve hit the nail on the head a few times and I’ve had a few misses. I predicted there would be no “silver tsunami”, when every boomer was supposed to move into assisted living, and sell all their homes… all at once, and flood the market with inventory… it didn’t happen. I said there was no “shadow inventory” that the banks were holding onto after the foreclosure crisis in 2009. Those were supposed to flood the market and drive down prices… didn’t happen. I also firmly stood up against the most recent “foreclosure tsunami” supposedly to occur as a result of forbearance during and after the pandemic… didn’t happen. One of my predictions for this year: prices would plateau… happening.
Longmont Area Real Estate Stats May 2023
Boulder Area Real Estate Stats May 2023
Northern Colorado Real Estate May 2023
When we see this report each month, it’s based on one month this year (May 2023) compared to the same month last year (May 2022). There are limitations to this comparison. The main one is the small data set where one high dollar sale or one big sales volume month can project an enormous yearly contrast. With the limited sight of this comparison, we can get a better view of the big picture from a larger data set. My prediction of flat home prices this year isn’t depicted very well in the monthly numbers, but it is in the year-to-date (YTD) data.
For instance, in May 2023, the average price for single-family home sales in Longmont shows a monthly average price decline of -2.2% compared to May 2022. Last month it was a decline of -4.8% and the month before it was -1.8%. In fact, four of five months this year show negative average price comparisons versus 2022. If we toss all that data into a hopper for this year and last, it reveals a year over year (YoY) 1.7% INCREASE in the average home price. That’s about as flat as flat can get. If this resulting comparison was -2.1% like in Loveland, I’d still argue prices are flat compared to the 8%-16% yearly price increases typical over the past eight years, across the entire Front Range.
Inventory seems to be growing in the Longmont attached and Carbon Valley single-family segments. It’s funny because most (89 of 134 currently listed) of the attached listings in Longmont aren’t even built. In fact, a dozen or so won’t be ready until 2024! This is good news for buyers who want a home. The same is happening in the Carbon Valley with new construction making up about 35% of their current inventory and responsible for their inventory increase. So, if you have buyers, the homebuilder segment is thriving now because of the lack of resale inventory.
Demand for home buying stopped collapsing last November. Since then, we’ve settled in to a pattern of fewer homes for sale and fewer buyers willing to pay current interest rates to purchase a home. I quantified what this looks like as best I could. I calculated to total monthly and yearly sales volume declines this year versus last. Five solid months of sales during high interest rates is a much better thermometer than the one month returns we normally see. Draw a rectangle on a map from Boulder to Erie to Greely, over to Ft Collins and back to Boulder. This area includes all the towns in my three Northern Colorado stats reports. The monthly total of sales this May is down -21.2% over May of last year (1,601 to 1,260). The YTD sales volume in the same rectangle is down 20.0% (6,211 to 4,968). The YTD results help to verify what is generally depicted in the monthly reports and the fact that it isn’t getting worse, shows the demand for home buying has established a baseline.
In essence, higher rates have slowed the velocity (or turnover) of sales, and slowed demand for purchases. Our vacillating mortgage rates represent an unknown in the market, and no market likes this kind of instability. Now that the Fed has stopped their rate hikes, we have a chance at stability, but there is always something on the horizon that seems to kick this idea in the shins like: the banking crisis, the debt ceiling scare, the war in Ukraine, steady unemployment, China relations unrest, etc., etc. If we can get a little stability, my other prediction of lower rates has a chance, but probably not in my predicted time frame of “somewhere near the end of the second quarter of this year."
If you were following my instructions carefully, you should be perfectly prepared to capitalize on lower interest rates when they do occur. You were supposed to be out growing your database and making sure each new contact was prepared to take advantage of lower rates in relation to their individual needs. The good news is, you have a little more time to expand your sphere before rates drop… and they will drop… eventually.
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