Novella Real Estate

A Metro Denver Real Estate Company

Navigate this Site

Larry McGee

Denver Real Estate Inventory

by

According to September statistics released by the National Association of REALTOR, the nation is still in a seller’s market, meaning we have less than six months of housing inventory available at the present sales rate. Looking at the Denver area market, the current rate of sales versus inventory indicates we have 2.6 months of inventory at the present rate of sales, well below the traditional definition of a neutral market of 6 months of available inventory. While rising interest rates have slowed the market, the market is a long way from stopping.

Comparison of Residential Construction

by

Denver Building Permit Graph

This is a national look at monthly new residential construction, broken down into the four stages of construction. Building permits and housing starts are the leading indicators that tell us where the market is headed. On the bottom, under construction and housing units completed are the lagging indicators of what’s happened so far. The leading indicators, the two at the top, permits, and starts are slowing down from May to June. Builders are concerned and very gun shy of rising mortgage rates. Builders are not going to overbuild. We’re not going to get started on more homes than we know we can complete. They’re being cautious right now, so while we’ve had 14 years of undersupply of newly constructed homes built in this country, they’re not going to overbuild at this time.

Real Estate Sales Breakdown

by

There has been a pickup in the inventory that we’ve seen recently, but it’s not from a big increase in new listings … but rather a slowdown in the pace of sales. And remember that a month’s supply measures the inventory relative to the sales pace. Same inventory, fewer sales, means more months’ supply.

– Mark Fleming, Chief Economist, First American

Inflation vs Mortgage Interest Rate

by

The highest inflation rate since the 1950’s was 13.3% in 1980. The current rate is the highest in 40 years. Note that until 2021, inflation remained below mtg rates. The sharp increases in both rates occurred because of the Federal Government’s response to COVID, pumping trillions of unearned dollars into an economy with not enough goods to absorb the available cash. Consumers can absorb higher mortgage rates if they have available income.

Looking Forward…

by

Graph of Interest Rates

The 10-year Treasury note dropped below 3% on June 30. The average mortgage interest tends to post at 2.20% higher than the 10-year note, so today Fannie and Freddie rates at 5.7% is an indicator that the mortgage market is pricing in the expected Federal Reserve’s increase of 50 basis points later in July. If that is true, mortgage rates may settle at 6% or less as we move into the fall.

Denver Real Estate Market Update

by

The Denver Metro Market is showing a steady increase in inventory, which is resulting in buyers feeling less pressure to make snap decisions. Sellers cannot expect 3 day sales, competing offers, and sale prices over asking prices. It is still very much a sellers’ market, but the velocity of the market has slowed rapidly.
 Having additional options can make the search for your next home easier. But inventory is still low overall, which means your house should still stand out when you sell.
 If your biggest question is where you’ll go if you sell, take this as encouraging news. Let’s connect to start the process today.

Real Estate Market Adjusting

by

Denver Real Estate Graph

As the market begins to show an increase in available inventory, it’s important for everyone to recognize that in a “normal” market, houses sell because they are: 

Priced right.

Meaning comparable sales need to be 60 days or less, preferably 30, & sellers cannot “reach” thinking they can squeeze another $10,000 out of the large pool of buyers. The buyer pool is very nervous, & with interest rates exceeding 6%, consumers will need time to adjust to the rapidly increasing mortgage rates. 

Showplace Pretty

Home sellers must prepare their homes to look better than the competition, & accede to at least some of the buyers’ demands after inspection.

The overall market will be fine, as there are more buyers than sellers, but how we prepare our clients for the buy or sell must include a discussion of expectations.

Why is Inventory Increasing?

by

Graph of housing for sale in Denver over the years.

As recently as June 2019, after just three long Pandemic-filled years, the Metro Denver residential inventory was 30,000 units, slightly increasing until September of that year and receding until February of 2022 when the cumulative monthly inventory stood at 9,004. The graph demonstrates the sharp decline, with the expected increase in the spring. How does a vibrant market like Denver experience that kind of drop in market vitality? 

1. A presidential election. No matter the outcome, half of the country was going to be emotionally distressed, egged on by a media that makes money in reporting or creating negative information. This distress shows in a population that is often fearful to sell their present residence. 

2. A Pandemic. Starting in March of 2020, the United States, along with the rest of the World, began the long, slow slide into a Pandemic economy. While available inventory was reasonable in the spring of 2020, the drop was perceptible as people continued to respond to the effects of the health crises. People that could buy a home did so, creating panic buying, while many homeowners became very cautious in protecting what they had. 

3. Inflation. For the first time in many years, American citizens began to feel the effect of increasing prices and, as we moved into 2022, sharply increasing interest rates. Only now are we seeing inventory increase as home buyers are becoming skittish in response to rising mortgage rates. 

4. A raging war in Europe. The United States has increasingly become engaged in a proxy war with Russia, supplying Ukraine with both lethal and non-lethal material to defend against Russian aggression. While the war seems a long way off, some people are beginning to get nervous about the possible impact on or to the United States. 

5. The combination of the above, along with various regional and employment stability issues, have served to reverse the buying spree that was evident during the height of the Pandemic. It is uncertain today if the rise in inventory is the result of normal spring increases, or portends a more serious reversal in the home sector.   

Source of Graph: REcolorado