Real estate inventory is trending up again, the market is on pace to end the year with more homes on the market than at any time in the past five years. The difference this time around is that buyers are asking sellers for more — and paying more as a result. Redfin real estate agents report that sellers in key markets are accepting lower offers than they have in recent memory as home values continue to rise.
Median home prices are continuing to increase faster than most incomes, which means fewer potential buyers can afford to buy a home right now. The increasing difficulty of getting a mortgage has also stalled some sales, while others have been put on hold until the new tax laws take effect. Here’s what you need to know about the current state of real estate inventory today:
Real estate inventory is increasing
Homeowners who bought at the peak of the housing bubble are finally moving out of their old homes and into new ones, which is replenishing inventory. In what’s traditionally a slow time of the year for real estate, inventory has ticked up in several markets. Inventory is also rising because of increasing home values.
When houses sell faster than they used to, and at higher prices than they used to, there are fewer houses on the market compared to what we have seen in recent years. The number of homes on the market nationwide is just 1.2 million more than it was at this time last year. That’s less than one-third of the 5.5 million homes that were on the market in 2011.
Homes for Sale in Colorado
Colorado’s real estate inventory is finally trending upward after years of being among the lowest in the nation. In fact, the state’s homes for sale are expected to rise a whopping 33% this year — one of the largest increases in the country. That rise in inventory comes as home values continue to increase and as mortgage rates inch up.
While inventory may be rising, homes are still often out of reach for many potential buyers. Colorado’s median home value is $303,200 — up 7% from a year ago and 43% from five years ago. Meanwhile, the median household income in Colorado is $74,809 — only up 2% from a year ago and 12% from five years ago.
More inventory in Colorado
The Denver Metro Area is seeing a big jump in the number of homes for sale. Denver Metro inventory is up 60% from a year ago and 14% from two months ago. Inventory is also up in the Boulder, Colorado Springs and Fort Collins metro areas. The number of homes for sale in the state’s most expensive real estate market — Aspen — is also up 25% from a year ago. Aspen’s median home value is $2,433,000 — more than 11 times the $209,000 national median home value. The average home value in the state is $390,951.
Inventory is rising, but homes are still unaffordable for many
Colorado’s inventory may be on the rise, but many homeowners who bought during the bubble are still underwater on their mortgage. That means they owe more than their home is worth. The number of homeowners who are underwater on their mortgage has decreased by 12% since last year. But it’s still higher than it was at any other time in the past five years.
Colorado’s real estate market was very tight in the years leading up to the Great Recession because of low inventory, but it was also because people were buying more homes than they could afford. There are signs that is happening again as home values are increasing faster than most incomes. The average interest rate on a 30-year fixed mortgage is 4.72% — just above the 4.5% rate that many economists consider to be the point at which home prices begin to slow.
Inventory by price point is also increasing
Home values are up across the board, but inventory by price point has also increased over the past 12 months. The number of homes priced between $500,000 and $1 million is up 23% from a year ago. But the number of homes less than $250,000 and more than $1 million is up more than 50%. The number of $5 million homes is also up slightly. The number of homes priced between $250,000 and $500,000 is still down from a year ago, but is only down by 1%.
Homes are staying on the market for longer
The amount of time that homes stay on the market before selling is also increasing. Nationwide, homes are staying on the market for an average of 77 days — up from 74 days a year ago. That time frame is even longer in the Denver Metro Area, where homes are staying on the market an average of 82 days. The average number of days that homes are staying on the market nationwide is the longest it’s been in four years. The average number of days that homes are staying on the market in the Denver Metro Area is the longest it’s been in five years.
Homes in some markets are affordable again
A few years ago, real estate market analysts declared that the middle class had disappeared from many major markets. But in a few markets, home prices are falling again, allowing more people to buy homes. The number of middle-class markets — where people can afford the average home with just a 10% down payment — is up from a year ago. The number of middle-class markets in Colorado is up from a year ago. So is the number of affordable markets.
U.S. Real Estate Inventory Over The Past 5 Years
Real estate inventory has finally recovered from the Great Recession, largely due to people moving out of old homes and into new ones. But the number of homes on the market is still below the 5-year average. The number of homes on the market nationwide is 12.5% below the 5-year average. The number of homes on the market in Denver Metro Area is 27% below the 5-year average. The number of homes on the market in Colorado is 46% below the 5-year average.
Why Is Inventory Still So Low?
There are several reasons why inventory is still so low. Firstly, homeowners who bought at the peak of the housing bubble are finally moving out of their old homes. That’s replenishing inventory, but it’s happening at a slow pace.
There are also fewer first-time homebuyers in the market due to financial reasons. In many markets, it’s been difficult for first-time homebuyers to get a mortgage because of strict lending standards. In others, first-time homebuyers are also having a hard time affording a home as home values keep rising. The difference this time around is that sellers are asking for more — and buyers are paying more as a result.
Conclusion
Colorado’s real estate market is finally moving in the right direction with an increase in inventory, but it’s still not enough to meet demand. Home values are rising, mortgage rates are creeping up, and first-time homebuyers are still having a hard time getting a mortgage.
Homeowners who bought at the peak of the housing bubble are finally moving out of their old homes, but it’s happening at a glacial pace. While more people are buying homes, not everyone can afford them. These market conditions are leading to more competition between buyers, which is driving up prices. However, Colorado’s real estate market is expected to remain strong, even as inventory remains low.
