It’s hard to know what to believe because everyone and their mother is the expert when it comes to their opinion on our local real estate market. This can be extremely frustrating when you’re thinking about buying or selling your own home. Bottom line is you’ve got to understand the data and be able to form your own opinions or at least be able to objectively look at someone else’s opinion as they’re giving it to you. That being said, here’s the data. Let’s dive in and see what it’s telling us. Will 2019 be another seller’s market?
There are a few different things a savvy investor or homeowner will look at, but mostly it’s trends in these categories:
- Active Listings (Inventory)
- # of Sales
- Months Inventory
- Median Sales Price
So let’s look at Active Listings first. Why is this important? Well this is the number of homes a buyer has to chose from in a given market. More important though is the trend. How has this been trending over the last 10 years? Here are 2 different ways you can look at the data.
And as always, I want to thank Empire Title for the amazing statistics that they provide to us on a regular basis.
This above graph allows you to see the seasonal ups and downs, where as the below graph allows for a view of more of long term trends.
This to me is a more helpful graph. You can now see where we’re trending. Inventory is on the way up. For buyers this is great news! For sellers it means maybe not quite as many multiple offers. But even coming to that conclusion is a stretch without more info. All we really know from these graphs are that buyers will have more choices and sellers will have more competition. Many people base their opinions on this graph alone, but it means very little without the next set of data.
More sales means that there are more buyers purchasing houses and more sellers selling houses. Above you can see seasonal trends and below it’s easier to see the overall trend. Clearly sales have been on the rise since the summer of 2011. But look at what’s started happening recently. Sales have been trending down since the end of 2017. Now you can start piecing together the data. Een the number of sales doesn’t mean a lot without the 1st graph (Inventory). Inventory is up and trending up. Number of sales are down and trending down.
So this seems to speak of a slow down in the overall market. But what does that mean to you? The next graph will bring a little more clarity. Inventory in Number of Months. What the heck does this mean? It’s simple…well kinda. It basically means that if no more homes came on the market, all the current homes would be sold in this many months. What you see below is the average Month’s Inventory for our Colorado Springs Market.
What does it mean that we’re at the highest Months Inventory since 2016? It means that homes will, on average, sit on the market longer.
But what does that mean for you in your price point? The below graph gets a little more specific in terms of price point and it makes a BIG difference in how long it takes to sell. Take a look at homes priced between 160-180k. In that price range you’ve only got .18 months or 6 days of inventory. That means that if today no more homes in that price point were put on the market, there would be no more left in 6 days. If you have a home that’s worth between 250k and 300k if no more homes in that price point were put on the market, they’d all be gone in 19 days. Even in the 300k-400k range you’re looking at only 1 month’s inventory. And that doesn’t mean they’re staying on the market an average of 30 days. It means that every single home out there, including the one listed yesterday would be gone, so you’re looking at an average days on market of significantly less than 30 days. But look what happens when you get into the higher end. It all changes drastically. This is why it’s so important to trust someone who is explaining the data, not just someone giving you their opinion.
So now you can see more of the picture. Number of Sales are trending down, inventory is trending up, and we are still well below the month’s inventory that is considered normal. Five to 6 months inventory is considered a balanced market (neither a buyer’s or seller’s market). So we can draw one definite conclusion. If you’re under 500k you are still in a seller’s market. But what does that mean for you as a buyer and what does it mean for you as a seller. Well there’s another graph still. Median Sales Price.
As you can see from the above graph, median sales price has been coming up since the end of 2011. So even though things seem to be slowing, median sales price is still on the rise. But there’s more and you’ve got to get more granular to see it. 2016-2017 and 2017-2018 showed 11-12% appreciation in median home price. 2018-2019 only showed 4.6% increase to ave sales price and 5.3% increase to median sales price. If we looked at each stat on its own, it might not mean anything, but when you look at them all together…
- Units Sold – DOWN
- Inventory – UP
- Month’s Inventory – UP – Highest it’s been since 2016
- Average Days on Market – UP
- Median Sales Price Increases – Starting to go back to normal (which is around 4% appreciation) but still going up
- Interest rates – UP and rising slowly
- Foreclosures at an all time low
…it starts to paint a picture. The market is shifting towards a more balanced market. We may see a plateau in prices in the near future. Inventory will most likely keep going up and sales will probably keep trending down, cooling things off a bit. But most likely nothing drastic is going to happen. Home prices aren’t going to plummet, which means it doesn’t pay for buyers to hold off hoping to catch a deal in the next couple years. They will most likely still end up paying more for the same home in 2020 then they would in 2019. And most likely still pay more in 2021 then they would have in 2020. But since interest rates are likely to rise slowly over the next few years, your payments will be more even for the same sales price. For sellers and buyer’s you’ve got to look at your individual price point to know what to expect. The one thing we do know is that we are shifting and plateauing out. If you have questions, we’d absolutely love to help, and there’s never any charge or obligation.