September 27, 2024 by Mark Ferguson
In this post, I’ll dive into the state of the housing market. We’ll analyze trends in interest rates, housing inventory, and inflation, exploring how these factors interact and impact both buyers and sellers. While no one has a crystal ball, I’ll review the latest insights and provide my best estimates of what may happen in the future.
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A Complex Housing Market
As many of you know, I’ve been involved in real estate for a while—licensed since 2002, investing in rental properties since 2010, and flipping houses since 2003. This experience has given me the chance to observe a variety of markets, but this one stands out as particularly frustrating. Whether you’re trying to buy, sell, or refinance a property, the high interest rates are making things difficult for everyone involved.
If you’re in the industry, whether as an agent, lender, or working with title companies, fewer transactions mean it’s hard to make money. The root of this challenge?
Interest rates, which we’ll explore in greater detail below.
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Housing Inventory: The National and Local Picture
Let’s start with inventory. Realtor.com’s data shows an 8% increase in the number of homes actively for sale compared to last year. This is a positive sign as more inventory should help stabilize the market. Additionally, the total number of unsold homes, including those under contract, has grown by 6.5%, and newly listed homes are up by 2.8%. However, these increases are small, and inventory levels remain well below pre-pandemic norms.
Locally, in Colorado, we see similar trends. The number of homes for sale has increased slightly, but it’s still far below the levels we saw before COVID-19. This is a national trend as well—active listings remain way down compared to the pre-crash era of 2006 when 5 to 6 million homes were for sale across the U.S., compared to just 1.15 million today.
The Impact of Interest Rates
Now, let’s talk about interest rates, which are arguably the biggest factor shaping today’s housing market. Historically, high rates haven’t always caused home prices to drop. For example, in the early 1980s, rates soared to 18%, yet home prices continued to rise. While today’s rates (hovering around 7-8%) seem steep compared to recent years, it’s worth noting that there are far fewer homes for sale, which keeps prices stable.
In fact, as Realtor.com’s data shows, median home prices increased by 1.4% year-over-year, despite high interest rates. Houses are also selling faster, with homes spending just 69 days on the market—a four-day improvement over last year.
How High Interest Rates Impact Real Estate Investments
The Role of Inflation and Predictions for 2024
Inflation has played a key role in pushing interest rates higher. If inflation continues to decline, there’s a chance we’ll see rates come down, which could stimulate the market again. However, it’s hard to predict exactly how much rates will fall. A small drop might make the market more competitive, while a significant drop could lead to a resurgence in demand, possibly driving prices higher again.
While we can’t predict the future, one thing is clear: the low number of listings and persistent demand have helped prevent any drastic price drops.
Future Value Inflation Calculator
Local Market Trends in Greeley, Colorado
Let’s zoom in on my local market in Greeley, Colorado. We’ve seen some fluctuations in pricing, but nothing too extreme. For example, the median sales price for November 2023 was $380,000, down 6% from November 2022, when it was $405,250. But if you compare December prices, you see an increase of 4%, with the median price rising from $405,970 in December 2022 to $423,373 in December 2023.
This variability highlights how easy it is to manipulate data to suggest a “crash” by selectively choosing specific months. Real estate markets are local and often volatile, especially when you’re dealing with small data sets. So, while headlines might shout about a 6% price drop, the reality is often more nuanced.
The Bigger Picture
Ultimately, the current housing market remains challenging, but it’s not on the brink of a crash. There are fewer homes for sale, but prices are staying relatively steady, even with high interest rates. Looking ahead, if rates drop, we could see a more competitive market, but it’s unlikely we’ll see significant price declines.
As always, be cautious of fear-mongering headlines that focus on short-term data points to predict disaster. The reality is more complex, and long-term trends suggest a market that remains stable, even in the face of rising rates and fluctuating inventory.
Thanks for reading, and if you have any questions about real estate or want more insights into the market, hit me up in the comments below.
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