The shortening of days – the darkening of the market?

    The question we have all been dying to know: What’s going on in the housing economy? While there is not a simple single faceted answer to this question, as it is more complex than any single stand alone factor – there are several core influencers which assist in painting a dynamic picture of our market’s health. Below are listed statistics which span several key categories which can be used to analyze the current state of our housing economy.

    Prices are falling: Home prices in September fell an average 4% over all price ranges from August listing prices. For the first time in years Denver’s notoriously ‘hot’ housing market has started to cool. This may be bad news for those currently trying to sell their homes, but inversely provides a point of entry for buyers previously priced out of the market. All things kept in mind, with signs pointing to a downward cycle, there are seasonal affects which traditionally mark slow down in the fall and winter months.

    Interest rates are rising: Not new news, debatably not good news, but all the same true news. To avoid going to nitty gritty into economic policy and the Fed’s decision to increase 10-year treasury note yields, the bottom line is interest rates are going up and correspondingly affecting mortgage rates. To look at a foreseeable example in terms of future rate hikes possibilities, if the note yield reaches 3.75%, mortgage rates could hit 5.75%. The takeaway with that being higher interest rates translate into less home able to be afforded. This could lead to the exclusion of a large buyer pool and in turn lessening housing demand, eventually devaluing home prices.

    *In case you were wondering about current interest rates:
    · Conventional 30 year 5.125%/APR 5.242%
    · FHA 30 year 4.75%/APR 5.69%
    · VA 30 year 4.75%/APR 4.96%
    · CHFA First Step (FHA loan) Down Payment Assistance Program 30 year fixed at 5.125%/6.165%

    Inventory is increasing: And is currently up 12.5% (up to 5,600 active listings) from this time last year, and additional 6% from last month (September –> October). In addition, days on market is has also increased an approximate 11.5% from this time last year. Another big number indicator? Units sold is down approximately 17% from 2017. Overall takeaway here being numerical indications of market slow down and cooling, again pointing to a skew of supply of demand. That said, there are still supply shortages.

    Supply is still down: Especially in the mid-range price sector. With all that has been said so far, there is still a defined shortage of supply of homes in the $300-$500 thousand price range, (keep in mind that the average price home in Denver being $540,000). A sixth month inventory is considered ‘balanced’, and we are currently at two month supply (up from five to six week supply during the height of the market). Speaking further to the competitive lack of inventory in the mid-level price range, this is also where 70% of transaction took place last month, but with only a 54% of active listings in this price range to match. If any market is taking a hit right now, it is not the average’s buyers and seller’s one, but the luxury.

    Ouch – That said, there has been a 33% decline in the price of single-family homes priced over $500,000. Luxury home sales plummeted 44 percent from August to September with a closed dollar-volume down an equal amount, totaling $173 million, yikes.

    The Denver economy is still strong – and this is important.
    Denver is the 5th fastest growing economy in the country, we have 6,000 jobs which pay over 100k, and additionally have seen a 4% wage growth since last year, the third best wage growth in the nation. Beyond that, Denver has the core fundamentals which support a strong economy much like the other cities which have not ever been hit dramatically by housing bubbles (ei; San Francisco, LA, NYC, Boston). With that Denver ranks high in job growth, steady population increase, housing demand, and diverse economy sectors.

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