Slow and Steady Wins the Race | Guest Post
Before diving into DMAR’s July Market Trends Report, it’s important to examine global trends in order to understand what's affecting our local housing market.
Q2 GDP has not come out yet, but is expected to be lower than Q1 which was probably inflated due to inventory hording in front of trade disputes. Central Banks across the globe are lowering their funds rates. Jobless claims ticked up ever so slightly, making it the highest in seven weeks, and ADP and BLM (Bureau of Labor Statistics) are showing weak job creation. Inflation is staying flat at 1.5% for the headline PCE (Personal Consumption Expenditures) and 1.6% for the core rate. The 10-year and 2-year have yet to invert but the 10, 1, 2, and 5 year rates are so close that short-term and long-term money are nearly equally rewarded.
So? Why do REALTORS® care?
Last July we saw 2018 turn on a dime. We thought the recession was here and we were going down, hard. Instead, we slowed down, way down. It was comparable to a common situation in traffic: You spot police ahead and begrudgingly move over from the fast lane to the slow lane. No, you’re not happy about it, but it’s the right thing to do.
We’re halfway through 2019 now, how far have we come?
The DMAR 11 county area is doing well, in fact, we’re doing better than that... the market is slow and steady. Inventory hit a new high since October 2013 at 9,520 active listings. Under-contracts are up 3.69% from last month and 11.11% from last year. Demand continues to be strong with mortgage purchase applications up 9.2% year-over-year. Months of inventory are still under three months under $750k for attached and $1M for single-family. Days on market is up 66% for the median and 25% for the average. The median home price for June is up 1.9 % from last year.
Median home prices and appreciation
Refresh your clients’ understanding of median home prices and appreciation. Denver appreciation comes in above the national average, so this may give clients some peace of mind. In the DMAR Market Trends Report, median home price is our best indicator of the direction and speed in which our local appreciation is going. But median home prices are defined as a measure of an equal number of homes sold above that price and below that price. There are gold-standard data aggregators that track billions of records spanning more than 50 years to show the change of value of specific homes sold and refinanced over time. CoreLogic, one of these aggregators, just released their May Price Insights today showing a strong national year-over-year appreciation of 3.6% and Denver’s year-over-year appreciation of 4%.
Should my clients buy, sell or wait?
The Case-Shiller forecasts a year-over-year appreciation of 5.6% in May 2020. We are also expecting the fed rate to drop by .25% to .5% at their July 30 meeting. What an incredible opportunity for both buyers and sellers. For buyers, these are the lowest rates since November 2016. Appreciation has slowed as we pull out of a long-running, strong sellers’ market and ease our way towards a balanced market. Plus, we expect home prices and the value of our investments to rise. Now, what about your clients looking to sell? Not a bad deal for them either. Sellers could walk away with more than five years of significant appreciation and value gain. They should be able to replace their current home with today’s low interest rates and will continue to see growth - albeit, slow and steady growth - as we head into 2020.
Remember, only twice did home prices come down during a recession and interest rates reduced accordingly. Record national housing equity and tight lending guidelines currently demonstrate a strong housing market. Whether your clients are in the market to buy or sell their primary home or if they are seeking investment properties, there is nowhere I would rather be than in Denver’s real estate market.
The Rueth Team of Fairway Independent Mortgage Corporation