Market Update: The Number One Reason Our Sellers’ Market is Slowing Down Right Now. | 11.26.18
I’ll bet you’ve heard these statements about our market, or something a lot like them, recently:
The bubble is bursting
With interest rates going up, there’s no way prices can continue to go up like they have
There’s more inventory on the market now, see? The market is slowing down.
You may have heard that the bubble is bursting because that happened right after crazy rising home prices not too terribly long ago. And when it did, it rightly (financially and emotionally) traumatized millions of people in this country, state, and city. You’ve probably also heard that rising interest rates will cause people not to be able to afford to buy houses in Denver, and when that happens, the market will slow down. And if you’ve been on cable news or social media lately, you may have also specifically seen that Denver has 30%-35% more inventory on the market today than we had a year ago this time (yes, that’s true). Surely it’s a sign that our now-six-year-long extreme sellers’ market is slowing down?
I hear these statements a lot. Pretty much daily. And I completely understand why people say them, but they aren’t accurate.
The bubble isn’t bursting because, in order to have a bubble, you have to have both rising inventory and rising prices. That’s what happened to our nation in 2008-ish when easy-to-get loans allowed lots of people to buy the excess housing inventory we had. This created a “false” market, and a resulting price bubble (and burst).
In Denver, we have low inventory because lots of people are moving here for jobs and the intense rising prices we’re experiencing are just a natural economic result of the low inventory.
Interest rates are going up, but they are still very far below historical interest rates. This will, likely, affect some buyer’s abilities to purchase as high as they may like, but will probably not put them out of the housing market. Nor will it keep reasonably strong borrows from entering it.
Finally, yes, we have lots more inventory on right now than we have last year at this time, but it’s a part of an extremely predictable cycle that we’ve been in since this sellers’ market began, six years ago.
And the Number One Reason Our Sellers’ Market is Slowing Down Now is…
Our boring, predictable seasonal cycle. We have lots more inventory for sale now because buyers have continued to enter the Spring market at ever-earlier times each year for the last six (between Jan-Mar). They also exit the market earlier (between May-Jul). Sellers’ need to sell hasn’t caught up to, and is ultimately independent of, the shift in buyers’ behavior. They continue to put homes on the market when it makes sense for them.
In 2018, many put homes on the market in July and August and some are still sitting because the wave of seasonal buyers has passed for the year. Don’t worry, like the tide, it’s returning.
What does this mean to you?
If you’re a buyer, go get a lender letter and take advantage of the excess inventory, relatively low prices/interest rates, and stressed sellers (and make sure you have a great agent who will help you make the most of your negotiating power!).
If you’re a seller (with a home on now), check your pricing and make sure it’s competitive if you want to sell this year! Or wait for early 2019 when you’ll get many more interested buyers and have a much better chance at selling for more money than you’d get for selling right now.
Believe in facts? Reach out and we’ll you get as many stats, graphs, and the real, verifiable data that we use in our market updates! This comes from trusted sources to help you understand our dynamic market and make your best real estate decisions!
Special thanks to Megan Aller at First American Title for backing up all of my assertions with real data.
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