Here is the latest video from our Chief Economist Matthew Gardner.
It’s full of great nuggets about what is happening in the economy and the real estate market today. Just Click the image below to play the video.
Our Chief Economist made a video for all of our clients where he shares his perspective on COVID-19’s impact on
housing. You can watch it by clicking the image below:
Headwind vs. Tailwind
So far the tailwind of historically-low mortgage rates are prevailing over Wall Street and COVID-19 concerns.
Buyers are still active. Properties are still closing. Moving trucks are still showing up at people’s homes.
Open house traffic has declined, but we notice plenty of buyers looking for property. (one of our open houses last weekend had over 40 visitors)
For many, the interest rates are just too good to pass up.
We even see instances of multiple-offer situations for properties priced right in high-demand locations.
Rates today, compared to 4%, equate to not only a monthly savings for those refinancing but also equates to tens of thousands in additional purchase power.
For the average price of a home on the Front Range, the savings is $171 per month and the increased purchase power is $35,811.
Here’s what we expect to happen over the coming months. Listing inventory and transaction volume will both decline. We will no doubt see lower activity compared to a year ago.
But thoughts of the market “coming to a screeching halt” can’t be validated because of the historical performance of our market and because of the inherent fundamentals in place.
We will continue to track the numbers and communicate the facts so that you remain well-informed.
|With the stock market on a wild ride and the Dow Jones dropping nearly 1,000 points yesterday, it makes some people wonder if the local real estate market might also crash or at least “correct.”
A little history lesson is in order.
Over the last 40 years, the real estate market along the Front Range has averaged 5.5% appreciation per year.
The highest appreciation in one year was 15.9% in 1994.
The lowest ever was -4.0% in 1982.
The last time Wall Street was in turmoil and the stock market was plummeting was 2008. This was, for many reasons, the worst economy of our lifetime.
That year real estate along the Front Range dropped 2.2%.
Meanwhile that year the Dow Jones fell 33.8%.
Bottom line, our market has no history of crashing or even experiencing a major correction.
Why is that?
The answer is fundamentals.
Our local economy has inherent fundamentals that insulate it from big downturns.
We have an incredibly diverse economy which is not reliant upon a single industry. We have all the way from health care, to technology, agriculture, oil and gas, major universities, and financial services (just to name a few).
We are a global destination with a major international airport.
Oh, and the quality of life here isn’t too shabby.
Prices of real estate, just like prices of anything, come down to basic economic principles of supply and demand.
Because of our diverse economy and desirable quality of life, there has been strong, consistent demand for housing along the Front Range.
While there may be little bumps along the way, over the long term our market has proven that it performs.
Interest rates on a 30-year mortgage right now are just about the lowest they have ever been in history.
- The rate today is 3.45%
- The lowest-ever in November, 2012 was 3.31%
- A year ago they were 4.35%
So, what gives? Why are rates so low? It turns out that the coronavirus is pushing rates down to historic lows.
The virus is causing uncertainty in the global financial markets. When there is uncertainty, there tends to be a flight from stocks into bonds.
Specifically, there tends to be a flight to U.S. Treasuries.
High demand for U.S. Treasuries means that the interest rates on those bonds goes down.
30-year mortgage rates track the rates on the 10-year Treasury and the 10-year Treasury just hit their lowest rates ever at 1.31%.
The uncertainty around the virus will likely keep rates down for the foreseeable future.
If you haven’t done so already, we encourage you to reach out to your mortgage lender to see if you would benefit by refinancing your loan.
Every so often we will hear a concern that another housing bubble is forming.
To help answer that question it’s valuable to look at the reasons that caused the last one.
There were three main drivers of the bubble that burst in 2008:
1. Easy Credit – loans were very easy to attain
2. Over-Leverage – people were using their homes at ATM’s
3. Over-Supply – too many new homes were being built
Now, let’s compare that to today:
1. Stricter Credit – the average home buyer today has a FICO score of 755
2. High Equity – collectively, U.S. homeowners have $19 Trillion of equity in their homes and collective mortgage debt has not increased for 13 years
3. Under-Supply – today we are building only two-thirds of the new homes being built in 2004 yet the population is much higher
Given this healthy information, we don’t see another housing bubble forming today.
Here is our interest rate Forecast for the next year.
Our Chief Economist, Matthew Gardner, predicts that rates for a 30-year fixed mortgage will stay between 3.8% and 3.9% for 2020.
He doesn’t see rates going above 4.0% until at least the first quarter of 2021.
This is obviously great news for buyers as their payments will stay much lower as compared to having a rate at the long-term average of 7.5%.
If you would like to see the slides from Matthew Gardner’s Forecast presentation, we would be happy to get those in your hands. Just let us know if we can help!
Here are the vital signs for the Northern Colorado market.
First, Larimer County:
- Average prices are up 2.4%
- Number of transactions is down 2.5%
- Inventory is up 11.9%
- Days on market is up 4.1%
Now, Weld County:
- Average prices are up 4.3%
- Number of transactions is up 3.6%
- Inventory is up 12.9%
- Days on market is flat (same as last year)
What this means is prices are still going up, just not as fast as they were a couple of years ago. More inventory is coming on the market which is great news for buyers.
Metrostudy, who in our opinion is the leader in new home research, recently did a study on the average price of a new home in each of the Front Range Counties.
Here are some interesting takeaways…
If you want to find the least expensive new home on the Front Range, the places to look are Weld County and El Paso County.
- Weld County Average New Home Price = $411,269
- El Paso County Average New Home Price = $427,361
The most expensive place for a new home is in Boulder County (no surprise) at $698,208.
Jefferson County has the largest difference between the average price of a new home and the average price of a resale home: $664,600 vs. $510,003.
Here’s the County by County breakdown of the average price of a new single-family home:
Boulder = $698,208
Jefferson = $664,600
Douglas = $624,315
Broomfield = $612,779
Denver = $581,480
Arapahoe = $545,943
Larimer = $507,105
Adams = $480,464
El Paso = $427,361
Weld = $411,269
If you want to see even more insights about the Colorado market so that you can make really good decisions about your real estate, you are welcome to watch this complimentary webinar, just click HERE.