Data just released by Altos Research shows that 35% of all homes on the market have had to reduce their asking price.
This is the highest this number has been since December of 2019.
This is also an indicator of sellers adjusting to the reality of the new market where overly aggressive pricing is not effective.
Extensive research shows the importance of pricing a home correctly on the first day so that the home sells in an appropriate time frame.
A stat that we have expected to change is finally changing.
“Days on Market” measures how long it takes for new listings to sell.
Over the last two years this stat plummeted to levels we have never seen before.
In the height of the market frenzy a year ago, properties were taking 7 days or less to sell on average.
Now, with the market cooling, Days on Market is back into double-digits.
Northern Colorado is at 20 days, a 54% increase over last year.
Metro Denver is at 12 days which is a 50% increase.
Here is a quick snapshot of our markets two weeks into July versus the same time last year…
Larimer & Weld Counties:
Metro Denver:
Single family new housing starts in 2022 will show an increase versus last year, will be the most since 2007, and will still be well behind the peak of 2006.
This year, experts predict that a total of 1.1 million single family homes will be started. In 2021 there were 970 thousand new home starts.
The peak occurred in 2006, when 1.65 new homes were started.
So, this year will finish 33% behind the peak.
When we are asked why today’s market is different from the ‘bubble years’ of 2004 to 2007, the difference in new home starts is one reason we cite.
Even though the market is cooling, we remain significantly undersupplied which insulates prices from any kind of dramatic downturn.
During a time of varying opinions and heavy speculation about the Front Range real estate market, let’s see what the actual numbers are telling us:
Inventory is up significantly year over year:
However, supply is still low as measured by months of inventory:
Transaction count is down as the pace of sales is slowing:
Yet, average prices are still up versus last year:
The best news in a long time has finally arrived for buyers.
Inventory is up, frenzy is down.
Buyers who were frustrated, confused and disappointed by the market a few months ago are now coming back to find a much more reasonable environment.
Demand is still high for sure. However, the intense, frenzied competition has subsided.
There is now room to breathe because there is more selection.
Here is how inventory has increased along the Front Range versus the same time a year ago:
Larimer County = 28%
Weld County = 19%
Metro Denver = 35%
These are significant increases and a trend we expect to continue.
A positive outcome of the cooling housing market is lower lumber prices.
Lumber is now priced at $605 per thousand board feet. This is a new low for 2022.
Prices for lumber are now down 47% for the year and are well below the 2021 peak of $1,733 per thousand board feet.
What’s causing this? Higher mortgage rates have slowed the pace of new home sales and remodeling projects.
Most experts believe that lumber prices will fall even further during the remainder of the year.
Here is what we notice about the market right now:
In Front Range markets, the number of homes for sale has just hit bottom or is about to hit bottom.
This is terrific news for home buyers who have been waiting for more homes to choose from.
The market is shifting, there is no doubt about that.
Prices are still increasing and we expect them to increase, just not at the pace they have been.
The inventory of homes for sale, which has been significantly down for two years, is finally starting to show signs of change.
We have been accustomed to inventory levels being down 30% to 50% compared to the prior year.
That is not the case anymore.
Inventory in Larimer and Weld County is now only down roughly 5% year over year.
Inventory in Metro Denver is now up 13.5% compared to this time in 2021.
We believe this is a legitimate shift in the market, not just a short-term anomaly.
No need to worry about prices crashing or a housing bubble. There is still too little supply and too much demand for that to happen.
However, the pace of price of appreciation will certainly get back to more normal levels of 5% to 6% per year instead of 20% to 25% per year.
Bottom line, this market shift has been a long time coming and is very good news for buyers.
A leading indicator of the health of any real estate market is Mortgage Delinquencies.
Specifically, the percentage of mortgages which are at least 30 days delinquent can foretell the amount of distressed properties that may hit the market in the future.
The most recent research shows that only 4.11% of all loans are delinquent.
This number has dropped for seven quarters in a row and is now at its lowest level since the fourth quarter of 2019 (which was the lowest ever in 20 years).
It is worth noting that the delinquency rate in the years leading up to the housing bubble hovered between 5.5% to 6.0%.
Based on this data, the likelihood of a foreclosure surge or a glut of distressed properties hitting the market is minimal.
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