The reports of the Colorado Real Estate Market’s Demise appear – at the moment – to be premature.
Make no mistake, late July 2018 through December 2018 saw a significant slow down in sales activity across the Front Range. Sales activity at year’s end more closely resembled 2015 than it did the all-out blitz of 2017 and 2018. This was still robust activity, but given the 80,000 – 100,000 people per year relocating to Colorado since 2011, it cast a surprising chill.
But a funny thing happened along the way. Interest rates also cooled, and as buyers sat on the sidelines, over-priced sellers started to adjust their prices. The result? Closed Sales in January 2019 on average closed at a price only 3% higher than January 2018; this despite the calendar year 2018 posting a 10% appreciation bump over 2017.
Rates have continued to decline into 2019 into the low 4%’s, and for all of February, the 30-year Freddie Mac 30-year fixed-rate averaged 0.04% higher than the same month a year prior. So while sellers became more reasonable, affordability returned for buyers as well.
The result? Can-Kicking Buyers that put off buying into 2019… they started buying.
The news this week will include closed sales for the month of February. Closed sales in January and February often reflect sales activity (contracts-made) from 2018. So these are the contracts from when: a.) seller prices often had not adjusted and b.) interest rates were averaging 4.64%, not 4.37%. To better understand what is going on in the late-winter market, it is better to look at Pending Sales.
The local news will report on something like this…
The Fixation will be to compare the 2019 column to the 2018 column.
Using this single-line of inquiry, the market has cooled off a lot because there are 260 more houses for sale right now than the same time last year, and around 60 fewer sales. Last year, the Months of Inventory (Active/Closed, how fast the entire inventory will sell-thru) was a screaming 1.29 months. This year, the months of inventory is 1.66. Thus the likely media-drawn conclusion: 1.66 is a bigger number than 1.29. Equals market is slowing.
Will anyone even get to that third column? Because 1342/800 is… 1.68. It looks like based on my manual-pull of data that February 2019 actually out-sold February 2017. The year that the greatest number of sales sold in a single-year? That would have been 2017. Last year started out super-fast and then slowed. All of 2017 was insane. There are likely more sales in 2019 than in “insane” 2017. The months of inventory now is identical to what it was 24 months ago.
What likely will not be in a local media report, but is considered a healthy barometer of sales activity by the National Association of Realtors is a Pending Home Sales Report. What is below is based on a manual-pull this morning, so it’s not an official number, but it captures exactly what a buyer would be looking at if they were searching for a home on this snowy Monday Morning, March 4, 2019:
In our local MLS (Called RSC, Realtor Services Corporation), there are only 1481 Single-Family Homes for sale. That goes against 1700 Single-Family Homes for Sale. I can’t tell you how many homes were for sale on March 4, 2018 or March 4, 2017, or how many were under-contract on that exact date, but I can tell you from institutional memory that there were significantly more homes under contract than for-sale each of those dates last year. The value of these numbers compared to one another is that they show that there are more homes spoken-for, than available for a buyer to buy.
Where it gets really interesting? RSC’s numbers include an enormous radius. There are properties reporting from Northern Colorado, Westcliffe, Pueblo West and other secondary markets that impact those MLS numbers. It’s a much more fair comparison to start comparing El Paso and Teller County data (the local data that is uniquely “ours”), which I only started doing when I joined LIV Sotheby’s International Realty one-year ago and had to differentiate myself from the northern, REColorado.com market data.
Here is what the data looks like when it is restricted to just El Paso County and Teller County:
In this comparison, there are 350 more Under-Contract homes than Active-Listings. For every Four Active Listings, there are 5 Under-Contracts.
Yet another funny-thing has happened to the markets in the interim. That gross number of Active Listings? It includes floor plans for builders not presently built. Think of those listings as both “We can build Model X at 123 Main for base-price $345,678” and “We are building Model X and 123 Main for $376,987, it presently is at foundation, and we don’t know when it will be done”. The MLS locally has about 450of these listings that include “possibilities” as well as new home-starts that will not be done for six to eight months. Since 2016, the probability a home sells has increased to over 80% in the Pikes Peak Region. It was at 47% in the low of lows during the last recession, 2010. Because it is so-probable that a home will sell, builders are taking a lot more “risk” in the $280,000 to $500,000 price brackets and they are spec’ing new homes and putting those in the MLS. These are better thought of not as active homes for sale, but active dreams that could be bought, and who knows when? So the best comparison is to drill down to El Paso County and Teller County Existing Homes For-Sale and compare that toEl Paso County and Teller County Existing Homes Under-Contract:
This is what a buyer today is REALLY looking at. For every 2 homes for sale, there are more than 3 that are presently under-contract in our region.