4 Cents is Double 2 Cents, but Way Short of a Dollar | Guest Post
Inventory is coming back online. Know how I know? Because I am reading headlines that tell me so. Okay, I'm kind of joking, but not really. Homebuyers and sellers are trying to figure out if now is the time to jump in or jump out. They're exhausted by the extremes and looking for a sign - a sign of more choices, a little longer to make those choices and the possibility of getting a deal.
Nationwide new listings are up a strong 5.5 percent year-over-year and an even more impressive 11 percent from last month. As the July DMAR Market Trends Report rolls out, we see that June was good for our buyers too! Our new listings were up 6 percent from last year and 24 percent from May. These new listings added 7,826 homes to the Denver market last month, lifting our 2,000 active listings to a less than healthy but certainly welcome 3,122 at the end of June. That's a 50 percent lift in one month but still shy of a healthy market. Remember, the average active listings for June is 16,098. This seller's market is prevalent as days in the MLS are still 4 for both detached and attached, and close to list was unchanged at 105.96 percent for detached and increased half a percent to 104.08 percent for attached. Meaning overall, buyers in June paid on average 5.4 percent more than sellers asked.
June is typically the peak for the number of closings, average closed price, median closed price and new listings. June this year started to show signs of normalcy, exhaustion, diversion. As people turn their attention to summer vacations, sporting events, festivals and the mountains, sellers see what the numbers are not telling us yet. REALTORS® tell me their listings have fewer showings, fewer offers and selling for closer to list price. Mortgage purchase applications dropped to a five-month low, and pending home sales slowed down to a 2 percent gain after last month's 17 percent month-over-month increase. It's hard to tell a buyer that now is the best time to buy when home prices continue to break records landing in June with a median closed price of $545,000, which was 1.5 percent higher than last month - annualized that would be an 18 percent gain in value which is exactly where we are year-to-date. As a buyer, you are paying $100,000 more for that median home this year than last year. But as a seller, you gained $100,000 in wealth while you slept, where you slept. That is why now IS the time to buy.
This high-speed rail will slow down. It is already. As buyers fatigue creates less competition, sellers will have to concede and sell their home for what comparables actually show as the value, not whatever buyers are willing to pay for it. However, limited historically comparative inventory will keep existing homes in demand. Ongoing changes in foreclosure policies will keep distressed inventory low. Current labor and material costs and shortages will keep new build options sparse and large investors building and buying homes for rent will continue to compete with want-to-be homebuyers. So even as we pull out of this crisis, what has been done will be difficult to undo. People who overpaid for a home did so in cash. They bought second homes, investment homes, and retirement homes, with sales up 57 percent year-over-year. Buyers sitting on the sidelines waiting for the bubble should remember that at Denver's worst in 2008, we lost 11 percent in average closed price in what was an over-exposed, over-leveraged, over-inventoried and under-populated year.
June saw a pause in real estate, the economy and in rates. As buyers chased other squirrels and sellers realigned their expectations, they were matched with an economy that settled in. Consumer confidence reached the highest level since the onset of the pandemic. Seven million fewer people are employed, yet there are 9.2 million jobs available. Lumber futures dropped 40 percent; mortgage rates bounced in a narrow range of 2.93 percent and 3.02 percent.
The Federal Reserve Board is meeting in late August to discuss tapering the purchasing of mortgage-backed securities. These conversations will begin the long road to drying out the liquidity flood we've taken advantage of in the stock and real estate markets. Rates will start to rise, giving buyers a reason to sharpen their pencils. But demographics and continued wage increases will keep sellers moving.
I am thankful for June's calm. Rising inventory and low rates kept real estate attainable. It remains a seller's market, and buyers need to jump on opportunities when they find them. However, based on June's data, the housing market may have just started its long journey towards a balance between buyers and sellers. But let's not fire up the band just yet. While active inventory took a leap, it's still way less than what the 3.3 million people and 1.4 million households in Denver call normal.
That's a wrap for this month's Market Trends update. Wishing you a whole lot of fun this summer mixed in with a bit of home buying.
It's my pleasure to keep you updated,
Nicole Rueth of The Rueth Team of Fairway Independent Mortgage Corporation
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