Constant Repetition Carries Conviction
Inventory in the 2018 housing market
American author Robert Collier once said, “Supply always comes on the heels of demand.” If he was correct, we have one heck of a supply coming our way. The most predicable economic principals have shown us time after time that a need never stays a need indefinitely. Every Realtor® fighting through this climate will tell you supply has been miles behind demand for quite some time. Given the gap, we must assume that our insatiable appetite for housing will soon be quenched…
I mean, it has to, right?
"In the Denver Metro area, there are currently only 1.2 months’ worth of inventory”, according to new numbers released by the Colorado Association of REALTORS® (CAR). Things are even tighter in Denver County at 0.8 – but both figures represent historic lows. While the metro area number reflects a 33.3 percent decline in inventory over just 12 months, the statistic’s big moment comes when we consider the equal but opposite reaction of price continuing its upward trajectory.
March 2018 data shows a 14.7 percent increase in average price over the previous year, while Denver kicks off spring with 7.5 percent fewer listings than last year – becoming abundantly clear that the Collier Model holds very true for our real estate market.
While prices continue to rise, a cause of inventory decline, more people than ever before are attempting to call Denver home. The demographic is changing as those who live in our city are either staying put, downsizing, or cashing out and moving to the ‘burbs. The makeup of the Denver area has changed and will continue to do so until supply can see demand through, at the very least, a telescope. For proof of this fact, look no further than the ‘Days on Market Until Sale’ statistic referenced in the same report as evidence of a steadily growing buyer demographic; cash.
Unrestricted on closing timeframes, cash buyers are beginning to heavily challenge the conventional 30-day transaction more than ever before. Based on the traditional processes both the real estate and lending course goes though, the pressure has always been on the lender to shorten their end of the timeframe.
With other real estate challenges, such as appraiser shortages delaying the valuation process and no shortage of Realtors® to bring requests to them, the long-standing norm of 30 days has faced immense pressure causing, you guessed it, the cost of appraisals to skyrocket. With CAR’s Market Trends Report detailing an average of 18 days on market in Denver, even the most favorable of financing options need to add a little hustle to their methods to stand a fighting chance.
The cure, the only cure - one that is all-powerful and heals all crises of demand - is supply. Supply which may not reverse the effects of a boom but will at least return markets closer to harmony. This supply, surely on the way, according to Collier, could face a larger rival than demand in the next year; initiatives and legislation. Ballot Initiative 66, which proposes a statewide growth cap, is attempting to poke its wretched head in to the already delicate balance. If successful, it will no doubt deal a crushing blow to our already arid supply of homes, among its many undesirable consequences.
As this contentious debate begins to shape up, let’s remain focused on supply. Let’s focus on the foe of supply and cheer its return to demand’s heels as we enter the most exciting time in all of real estate: the Spring Home Buying Season. While the story is one of challenges and obstacles, buying a home remains the very best way to secure lifelong financial security and strength. The story of homeownership is one of riding these waves – the highs and the lows – all the while knowing that the house always wins, no matter who’s dealing the cards…even if it needs to be demand for a little while longer.