The Housing Market is Rebalancing
Even if sales continue to slow, the sky is not falling
It’s no secret that living in Colorado is about as good as it gets. You needn’t look further than the statewide surge in population – or a drive up I-70 on a weekend – for proof that people love it here.
In housing, the growth and popularity of Colorado – especially the Denver metro area – has helped fuel a red-hot sellers’ market for several years. That has generated consistently high demand, steadily rising prices, multiple offers and for-sale properties that have sold quickly. All of these have been positives for those who want to sell a home.
But something has changed. The market is rebalancing.
The Denver area is one of 54 markets we analyze in the monthly RE/MAX National Housing Report produced at headquarters in the Denver Tech Center. The latest report, covering sales data from September, reflects a 19.3 percent drop in year-over-year Denver sales for the month. (The national year-over-year decrease was more moderate at 11.6 percent).
But Denver is in good company.
The 10 metro markets with larger year-over-year drops in September include five other Western meccas with tremendous appeal: Seattle (-27.4 percent), Portland (-20.7 percent), San Diego (-20.4 percent), Los Angeles (-20.2 percent) and San Francisco (-19.4 percent). Like Denver, all of them have local housing markets that have tilted heavily toward sellers.
From our perspective, the September drop was abrupt and stronger than the normal seasonal slowdown. It caught many off guard, but it’s no cause for panic.
Even as sales have tapered, the median price of metro-Denver homes sold in September 2018 was still 6.4 percent higher than in September 2017. Nationally, based on the 54 markets surveyed, the median sales price increased year-over-year for the 30th consecutive month.
Although it does appear that high prices and rising interest rates helped drive sales downward last month, the data doesn’t suggest that a radical correction is imminent. Buyers and sellers are adjusting to a changing environment as housing rebalances from what has been an unsustainable scorching-hot sellers’ market.
To be sure, there are headwinds at play right now, both nationally and in Colorado.
Affordability issues, rising interest rates, construction costs and inventory shortages top the list in many places.
However, key fundamentals of a healthy housing market remain strong – including demand, employment, consumer confidence, demographics and household formation. There’s little doubt that quality, well-priced homes will continue to sell in growing communities where people want to live. And more buyers entering the market would be good long term.
So even if the sales slowdown continues, the sky’s not falling by any means.
Rather, the ongoing rebalancing – a return to greater equilibrium and opportunity – seems to be the result of normal market forces. In the long run, it opens the door to homeownership, creates a more dynamic market and serves everyone – especially those who’ve made such an amazing state their home.
Adam Contos is the CEO of RE/MAX.