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Inventory Solstice
There is a significant transition that is taking place in the Northern Colorado market.
There is now more inventory on the market at this time of year than at any time since 2020.
2020 marked a turning point in the market where both interest rates and inventory plummeted.
For many years, the market has been working to get back to pre-COVID levels of inventory.
It finally happened.
However, inventory is still well below 2017, 2018, and 2019 levels.
This means there is nothing resembling a ‘glut’ of inventory.
But, this milestone is significant.
Mid-Month Check-In
Here is a look at the Northern Colorado market halfway through June compared to the same time last year.
Inventory is climbing at a healthy rate in both Larimer and Weld County giving more options for buyers.
Larimer County inventory is up 18% and Weld’s is up 13%.
Meanwhile, sales are down slightly which is not surprising because interest rates have been slightly elevated until very recently.
These two factors have caused months of inventory to increase. But, this very important statistic is still measuring below 3 months in both Larimer and Weld Counties, demonstrating there is sufficient demand for the current supply.
Midway Check-In
We are halfway through May. This is how the numbers stack up versus the exact time last year.
Larimer County:
- Inventory up 26%
- Closings down 4%
- Average Prices up 13%
Weld County:
- Inventory up 18%
- Closings up 6%
- Average Prices down 5%
More Powerful
As the saying goes, Superman is more powerful than a steaming locomotive (and able to leap tall buildings in a single bound)!
In real estate, supply and demand is more powerful than interest rates (and able to push price appreciation year after year)!
The fact that prices keep rising in Northern Colorado, even though interest rates are over 7%, is because of one factor- supply and demand.
Supply and demand is most easily measured by months of inventory which considers how long it would take to sell the current inventory at the current pace of sales.
Larimer County has just over two months of supply. Weld County has just under two months.
Fundamentally, while months of inventory stays below four months, prices are pretty much guaranteed to keep going up.
Leap Year
The statistic that is leaping so far in 2024 is inventory.
Northern Colorado is seeing a big uptick in number of homes for sale.
However, it is not an alarming amount and is still a ‘Seller’s Market’ by definition.
Larimer County inventory is up 39% and Weld County is up 48%.
Months of inventory is up to 2.3 in Larimer County from 1.7 months a year ago.
Weld County is also at 2.3 months today and was only 1.2 months a year ago.
With higher inventory comes more selection for buyers and more importance for sellers to price right.
Double, Half, Fifth
Today’s inventory of residential properties along the Front Range is…
Double what it was in 2021 (the all-time low)
Half of the long-term average (going back to 1985)
One-fifth of what it was in 2006 (the all-time high)
Mis-Led
The most misleading stat about the housing market is increase in inventory. The number of properties for sale is up significantly compared to last year. In most locations along the Front Range, inventory has doubled.This is obviously great news for buyers because they now have more choice.This is obviously meaningful for sellers because they now have more competition.But, it does not mean there is a glut of inventory. It does not mean that we are now, all of a sudden, over-supplied.Quite the contrary. The market is still undersupplied. There would need to be at least double the amount of homes for sale for Front Range real estate to begin to be balanced.The increase in inventory, being so large, gets a lot of attention in the media and can sometimes be taken the wrong way.Yes, inventory has doubled. But, it has doubled compared to all time lows.Freddie Mac reports that Nationally, the market is undersupplied by 3.8 million housing units.So, the increase in homes for sale is a good thing for the market and is nothing like a glut of inventory.
Halfway Check
This is a market which is changing quickly. We are studying the numbers every day so we can be clear about where the market is heading.
Here is a check on the market halfway through October.
Compared to last October…
- Available inventory is up 73% in Northern Colorado and up 112% in Metro Denver. This is significant for buyers who, for years, were challenged with limited selection.
- Number of closed transactions is down 50% in Northern Colorado and 41% in Metro Denver. This reflects the fact that fewer buyers are active right now given higher interest rates.
Prices continue to be higher than last year. They are up 12% in Northern Colorado and 13% in Metro Denver. We don’t expect double-digit increases to continue, but don’t expect anything like a price crash.
More Days
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.
Top Three
Here are the top three reasons why prices are unlikely to crash even though the market has cooled off:
- Inventory – Ultimately, prices are driven by supply and demand. Although supply has increased, it still remains relatively low with less than two months’ supply in most areas.
- New Homes – New home construction still lags behind the demand stemming from population growth. New home starts today are roughly 2/3 of what they were in 2005.
- Credit – Home buyers today are highly qualified which protects the market from a glut of ‘distressed’ properties hitting the market in an economic downturn. The average credit score of buyers is now 776 which, by definition, is ‘excellent.’ Only 2% of loans today are given to buyers with scores under 640 whereas in 2001 25% of buyers had that low of a score.
