- Hornung and 8z broker Moss address real estate issues.
- It’s not a bubble.
- Rates still low
By Lane Hornung and Angela Moss
Special to InsideRealEstateNews.com
Despite growing chatter at the national level about the housing market getting downright bubbly again, the ongoing upswing in our local real estate markets is not a bubble, but rather a reflection of a simple reality — too little supply for existing demand.
Before we take a look at some of the hot topics in real estate today, here’s a quick look at the most recent market data.
The volume of real estate sold across all Front Range markets in May increased 30.2 percent compared to last May. More new listings came on the market, but the number of sales grew even faster, and the supply of inventory fell slightly to 2.3 months.
The volume of real estate sold in the Denver proper market in May increased 18.6 percent compared to May of 2012. The supply of inventory remained steady at a super tight 1.3 months.
Now, a roundup of real estate topics you may have seen in the news and how they impact our local markets:
- New listings are hitting the market. More and more home owners are realizing that now is a great time to place their homes on the market. Unfortunately, there are not enough new listings to satisfy the demand of buyers already in the market. As a result, our inventory remains tight at all but the highest price points.
- Wall Street money is inflating home prices (just not here). A spate of recent articles has declared that institutional investors are creating another housing bubble as they snap up single-family resale homes by the thousands. This may be true in markets such as Las Vegas, Phoenix, and Orlando, but the number of institutional buyers active in our local markets is quite small. Prices just did not drop far enough in the post bubble crash in Colorado to attract these large pools of capital looking for big potential returns.
- Foreclosures plummet. According to the Colorado Division of Housing, foreclosure filings were down 50.5 percent in Colorado in May, falling to the lowest level recorded during May in any year since data collection began in 2007. Fortunately, as home prices continue to rise, more and more home owners are able to avoid foreclosure.
- Rates, they are a rising. Interest rates have ticked up about half a percentage point in the last few weeks. A half percentage increase in rates reduces the purchasing power of a home buyer with a 20 percent down mortgage about 5 percent. That is certainly not welcome news for buyers who are active in the market right now. That said, a 30-year mortgage at 4 percent or 4.5 percent is still a great rate and is not sending buyers to the sidelines. For now, buyers are more worried about finding new listings than they are about increasing interest rates. If anything, the recent uptick in rates has spurred even more prospective buyers to jump into the market. Rates climbing higher than 6 percent, however, would probably curb buyer demand significantly.
- Tying it all together. The fundamentals of our housing recovery are sound, with demand being driven by moderate job growth, strong household formation, and low interest rates. The supply side remains constrained by a shortage of permit ready lots for new construction homes and a relative lack of resale listings.
Expect to see our market continue to be strong through the summer, although the “frenzied” feeling may cool a bit as more listings come on the market, interest rates trend upward, and our sellers’ market becomes “old news” and the new normal…for now.
Please email or callif you want to discuss market conditions in more detail or for any specific questions. Thanks.