Some People Are on the Move!
Things are heating up! Both literally, because Summer is officially upon us, but also figuratively when it comes to the pressure cooker that is our current real estate market. Unprecedented low housing inventory has persisted into summer. As of June 1, there were only 2,075 houses on the market in Metro Denver, down a whopping 71% from last May. This extremely low inventory has driven up average home prices. If you look at the Monthly Market Snapshot below, you can see that the average sales price is up 26% from this time last year. Some of that price increase is due to the lack of entry-level inventory on the market, with a larger amount of luxury homes making up the inventory than normal. However, if you look at the median sold price, which removes some of the extreme luxury outliers, the average sales price is still up about 22% over last year!
As you can imagine, many homeowners are jumping on the opportunity to sell their homes and cash out, sometimes moving to more affordable parts of Colorado, or even out of state. Others are afraid to sell their homes because they are fearful that they may not be able to find another home to move into. Many are content to stay put because they have seen an average equity increase of $47K in Colorado since last June (Source: CoreLogic). The high prices are also pushing some would-be buyers out of the market.
Did the pandemic affect migration within the state?
We were curious how the pandemic had affected migration within the state. The charts below show the net migration per county over the past 3 years. One thing to keep in mind is that these percent changes are based on the overall population of that county, which does vary. However, you can see that 2020 negatively impacted the net migration to Denver, Boulder, and to a minor degree, Arapahoe County. In contrast, Weld County and Douglas County have experienced an inflow of residents. Some of the mountain counties also had a positive net migration, such as Grand County and Summit County.
Another development to note is that buyer demand may finally be softening. According to the Wall Street Journal, the University of Michigan’s national “Buying Conditions for Houses” metric fell to its lowest level since the height of the pandemic shutdown, dropping even lower than April 2020. This will most likely lead to a gradual reduction in the buyer pool. Fewer buyers will likely lead to an eventual slowdown on average price increases. If you are a seller looking to capitalize on the current market, now would be a good time to list your house before this new trend takes full effect. If you are a buyer, this may herald a bit less competition in the future.
Low Inventory Still an Issue
Even with fewer buyers looking for homes, there are still major obstacles to fixing the low housing inventory issue. These obstacles will most likely keep Metro Denver a seller’s market for some time. Commodity prices are one major concern since the materials to build new houses saw huge spikes due to Covid. Lumber is a great example. Prices per/yard have tripled since the pandemic hit. Part of this is due to shipping complications, an increase in home renovations, and a European pine beetle wreaking havoc and causing supply shortages. On the bright side, measures are being taken by the state to apply some of the Covid stimulus to affordable housing and new developments are being built. However, the scarcity of homes for sale is not likely to fully dissipate for years to come.
If you’re thinking of making a move and want to find out the best strategy for your unique situation, don’t hesitate to reach out! We would love to support you in achieving your real estate goals.