A significant dynamic in the Front Range market is the relatively low inventory. This is the main reason why prices are stable despite higher rates.
Here is some perspective on the inventory of homes for sale to help give some context.
Today’s inventory is:
The most surprising piece of news for our friends and clients is that prices are essentially flat compared to last year. People find that surprising given what interest rates have done over the last 18 months. They wonder, how could prices not fall significantly after interest rates jumped considerably?
The answer is the fundamental economic lesson of supply and demand.
There is enough demand in the market for the current supply to keep prices stable even in an environment of higher rates.
Now that rates are (finally) trending down, it gives us even more confidence about the continued growth of real estate prices along the Front Range.
Here is a look at how home prices compare to one year ago:
Larimer County = Down 0.8%
Weld County = Up 3.4%
Metro Denver = Up 0.8%
In addition to tracking the average price for sold properties, it is also interesting to track the average price for active properties.
Asking prices are up across all markets when compared to the same time last year.
Here are the average list prices for residential properties along the Front Range:
These asking prices are higher than average sales prices by approximately 30%. This is because there are many high-end properties on the market which take longer to sell and which pull up the average.
The recent drop in mortgage rates triggered a measurable uptick in sales activity.
So far through the first 10 days of November, pending activity in Northern Colorado is up versus the same 10 days last year.
This is despite interest rates being higher than they were last year.
Mortgage rates just had their biggest one-week drop in over a year and buyers clearly responded.
Pending sales through November so far are up versus last year:
48% in Larimer County
20% in Weld County
Despite decreased buyer activity driven by normal seasonal patterns plus higher interest rates, the key stat of Months of Inventory continues to stay relatively low.
Months of Inventory (MOI) is the simple measurement of how long it would take to sell the current inventory of homes for sale at the current pace of sales.
Along the Front Range, this stat ranges from roughly 2 ½ months to just over 3. A market is considered ‘balanced’ when there is 4 to 6 months of inventory for sale.
Here are the specific numbers for Front Range markets:
Larimer County = 3.1 Months
Weld County = 2.7 Months
Metro Denver = 2.4 Months
Despite a significant increase in the supply of apartments, rental rates are holding steady.
New research from Realtor.com shows that lease rates in the largest U.S. cities are down just 0.7% even though completions of apartment buildings are up 15% since 2022.
Denver’s average apartment lease rate decreased only 1.0% year over year and now stands at $1957 per month.
Net worth surged for American families during the pandemic era, largely because of increased home values based on the Federal Reserve’s Survey of Consumer Finances.
Net worth is a measure of household assets after accounting for liabilities. After accounting for inflation, median net worth jumped to $192,900, a 37% increase from 2019-22, the Fed found.
That percentage growth was the largest since the Fed started its modern survey in 1989. It was also more than double the next-largest increase on record. Between 2004 and 2007 real median net worth rose 18%.
This is an interesting and important time of year for current home sellers.
Thanksgiving is approximately 45 days away which is an important deadline for home buyers.
Many buyers who are considering a move this time of year would like to close on a home before Thanksgiving.
Current home sellers have a one to two week window to have their property under contract so a buyer can close by the Thanksgiving deadline.
Activity always slows in the winter and typically doesn’t show a noticeable increase until March.
So, proper pricing is paramount today so that sellers can take advantage of the seasonal window which is closing soon.
More and more sellers are having to reduce their listing price.
Nationally, 37% of all home sellers have recently had a listing price reduction. This is according to a recent report from Altos Research.
This is up from 30% in May and is now at the second-highest level since 2018. The highest it has been in the last five years is November 2022 when it stood at 41%.
A “normal” range is between 25% and 30%. Today’s number is a result of softening demand based on higher interest rates.
Proper pricing is always important for a seller and is especially so now as we enter a typically slower time of the year with added challenges related to interest rates.
The most notable change in the market, in terms of a specific statistic, is months of inventory.
This statistic measures how long it would take to sell all of the current inventory at the current pace of sales.
Months of inventory has jumped to three along the Front Range.
One year ago, it was two months. Two years ago, it was three weeks.
The jump is a result of decreased demand driven by higher interest rates combined with slightly increasing inventory.
We expect months of inventory to continue to increase and imagine it could be at four months by this winter.
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