Do you ever wonder what the average number of days on market is per price range? Or what is the average sales price per price range? Well here at Novella Real Estate, we take time to study the market, so you don’t have to! Just ask!
Metro Denver Real Estate Statistics
Inflation vs Mortgage Interest Rate
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…
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
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.
Why is Inventory Increasing?
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
Foreclosure Filing Report 2021
As seen in the graph, foreclosures are not a national financial problem. That said, new data from the Harris Poll shows that 84% of Americans plan to cut back on spending as a result of price spikes. More than 70% of respondents said they’re feeling the effects of inflation the most in gas prices and groceries.
Denver Single Family Home Sale Statistics
The Denver area market showed very strong sold/closed statistics in April of 2022. The slowest market in the extreme southwest Metro Denver area zip code of 80135 showed 11.92 weeks of inventory, at an average sold price of $2,465,375, while the most aggressive was the Lowry area zip code of 80230, averaging $1,588,571 with no standing inventory.
Out on the limb prediction: May closings will show a slight slowdown, as the pace of pending contracts slowed in April.
The external factors of higher interest rates, strong inflationary issues in the fuel and agricultural sectors, and the uncertainties stemming from the Russia/Ukraine war will act to slow the housing market. But be aware that slow does not mean stop. The population demographics that are pushing the market have not changed, and will not until late in this decade. We simply have more needs than available products.
Out on the limb prediction: The housing market will begin to level, with slight increases and decreases on a month-to-month basis. Prices will stabilize over the balance of 2022. The predictions from economists and the many market observers offer a wide swing in predictions regarding interest rates, inventory, builder starts, and any other overall market segment remotely related to or dependent on the housing market. As one of the observers, I am taking the conservative middle ground based on the overall need for housing by the expanding Metro Denver population, at least for the remainder of 2022.
Primary Mortgage Market Survey
Let’s consider the chart and quoted rates. First, the residential mortgage market has increased by 2% points since Christmas of 2021. If we add in the quoted points, the rate today for a 30-year conventional mortgage is 5.35 to 5.5% depending on lender and credit scores. We are seeing prices of everything we buy, especially food and disposables going up sharply, with the Federal Government showing an 8.5% inflationary jump in the past 12 months.
Why?
A combination of things that our popular media has difficulty explaining, but the majority is the trillions of Federal stimulus money created to provide relief for the effects of the pandemic. If money is created without economic support, then the result is inflation, which reflects in the price of everything. Energy policy limiting the future of petroleum products, or shifts in import volume contributes, and there is some effect based on the ego-driven war in Ukraine. Of course, easy money and a lack of housing inventory has worked to push housing prices beyond any reasonable expectation, but that has been a slowing rolling train wreck over a period of years. Increased family formation coupled with a lack of product forces prices higher, in some cases at bank-breaking levels.
Will things get better? Of course, but it will get worse before it gets better, and it will take a while. The United States has to recover from the shock of too much money and increase our production output to compensate. We will leave that problem to the nice economists to explain.
Novella Real Estate