Can’t Win ’em All. Prices Continue to Increase.

It’s clear my super-powers do not include the ability to reduce interest rates, increase inventory or reduce real estate prices. Not sure if it’s a super-power, but I’ve been good at calling my shots in the local real estate market over the past 17 years. I was vehement in my now correct predictions of no “Bubble 2.0” and no foreclosure tsunami due to forbearance. The crystal ball was a little fuzzy when I made the wrong call that home price appreciation would level off years ago. As they say, you can’t win ‘em all.

The appreciation call was wrong because of two very specific influences I didn’t fully appreciate. The missed market influences are the buying strength and size of the millennial generation; and not knowing that an outsized portion of our low inventory problem is actually a lack of supply. I always knew millennials see things differently than previous generations and I believed a lot of our inventory problems were from people aging in place and other who were “rate locked” in their home. How does the demand from the largest generation of home buyers, lack of home supply and the new fun of 6% interest rates mean for the market today?

It means demand will normalize. This is a foreign concept to many agents because they never worked in a normal business. What’s normal? A six-month supply of active listings. Interest rates of near 7%. Days on Market of 90 days. Buyers and sellers negotiate. Buyers don’t pay over list price. Think about it, bidding wars have NEVER happened before. What we have been living in for the past 4 years is NOT normal.

2022 4th of July Fireworks Show at Fox Hill by Alan Crowder

As interest rates hover around 6%, the market will tap the breaks of the market, millennials will slow their roll a little and price appreciation will drop from 16-20% to 5% (finally!). We can find a lot to complain about in this market, but what do you think prices would be doing right now if we still had 2.75% interest rates? That’s right… skyrocketing. This market cool down will help to rebalance the scale between buyers and sellers, which has been tilted heavily in favor of the seller since 2018.

Longmont Area Real Estate Stats June 2022 (pdf)

Longmont Area Real Estate Stats June 2022 (.jpg)

Total sales volume will end the year pretty much the same as we see in this month’s graph. Overall, first-half closings in Longmont, while seemingly low, and at their lowest point since 2012, are only 10% below their 11-year average. Closings so far this year in Boulder aren’t as low as lockdown plagued 2020, but their closing total looks bad compared to 2021, which was it’s highest ever; and it’s only 14% below its 11-year average of 371. Ft Collins is in the same boat as the rest at 12% behind their 11-year average. Loveland, Greeley, Erie, and the Johnstown/Milliken areas are bucking the trend mostly due to sufficient new construction.

A couple of interesting things about Longmont’s first-half numbers. First, there were the EXACT same number of single-family homes listed in the first-half this year and last… weird. The average sales price of a single -family home for the entire first half of the year is almost the exact same as the average price in June ($666,984 in June – $666,241 for 1st half). Average days on market went UP a whopping 12% to 28 days, which makes sense since we have 111, or 1.1 months of active listings. My report shows 212 active listings, but that number includes all under contract, since they aren’t closed yet, and that number was 80 in January, so it’s good to have choices.

Speaking of choices, look at the increase in attached inventory in Longmont. I’m not sure I’ve ever seen anything go up that fast. Some of the increase is due to the 13 new construction attached homes. There are also 11 listed for over $600,000. That’s high…even for Longmont. Condos and townhomes were always the value play or entry level in the Longmont housing stock. I say $600k+ is neither. Things are certainly changing.

The Carbon Valley is still chugging along with better affordability than Longmont, but we have discussed this many times. Prices in Longmont are pushed by the astronomical prices in Boulder. The Carbon Valley then follows. They are also a better value alternative than Ft Collins and Denver. Their sales prices stay moderate because they aren’t a primary residential destination. Moderate prices also drive their brisk sales volume. There is also good volume of new construction to offset demand a bit more than in other areas.

Our guest area this month is Greeley. I’ve said it before, and I’ll say it again. They are the best value in single family homes in Northern Colorado. Look at the prices. Their attached home market is similar with average prices in the $330,000’s. Wouldn’t you love to go back to 2018 and buy a home for under $500k? Here is your chance. Their population is even higher than Longmont, which apparently just broke the 100,000 resident mark last month.

I’m looking forward to seeing numbers from the rest of 2022. And I’m looking forward to seeing each of you sometime soon. Did anybody see the fireworks? They were awesome!

Cheers,

Kyle Snyder

ksnyder@firstam.com 

720-534-8355