— By Jon Terry
Everyone seems to be worried about an impending recession and all the economic indicators that are pointing in one direction or another. I just read an article indicating that there is a 17% likelihood of a recession. In another article from an investment firm, their models show a 43% likelihood of a recession. It seems that it is still a little too soon to predict whether we will go into a recession in 2022; however, it is not too soon to demonstrate that the real estate market is softening. This is welcome news to many buyers who have been competing trying to buy a home in metro Denver.
As a result of the rising interest rates, inflation, and decreased consumer confidence, it is pretty clear that things are changing quickly. While we do not see any reason to panic about the real estate market, we do anticipate seeing a change in the days on the market, the months of inventory, price reductions, and changing strategy for how listing agents market homes. Sellers should expect it to take a little longer for an offer to come in and buyers should start to see less competition. Anecdotally, we have definitely witnessed this for our Alaris’ clients.
Here are the facts for the Five County Metro Denver Region (Adams, Arapahoe, Denver, Jefferson, Douglas)
Average number of listings in April, May and June 2022: 5,186
> That is an additional 2209 listings each month, which is astonishing.
Average number of sales in April, May and June 2022: 4,753
> Given that listings went up by over 2,000, it is notable that sales only went up by 1,000.
Average days on the market in April, May and June 2022: 10
> Homes are still selling very fast, but I do expect this to begin to slow down as well.
Months of inventory in April, May and June 2022: 1.5 (June was at 2 months)
> This is a clear sign of a changing market. We are still in a seller’s market. As I have mentioned in the past, a balanced market, between a buyer’s market and a seller’s market, is typically represented by 6 months of inventory.
Number of price increases in April, May and June 2022: 643
> The number of price increases will likely continue to go down
Number of price decreases in April, May and June 2022: 2,117 (this number has been going up every month. There were 3,474 price decreases in June.
> As sellers get nervous about receiving an offer, they tend to use the most obvious tool at their disposal, and that is lowering the price of their home.
Number of homes going back on the market for any reason after going under contract in April, May and June 2022: 1,019
> Many buyers are losing their ability to buy in certain price ranges as the interest rate goes up, thus causing buyers to have to terminate their contracts.
Of course, another major factor that we see being impacted is a lowering of Consumer Confidence that is fed by consumers having to spend more money on consumer goods, credit card balances (really anything with a variable interest rate), rent, food, gas, etc. Lower consumer confidence tends to lead to people delaying making major purchases like buying a new home.
We will continue to monitor the real estate market for you and bring you important news. As always, if you have any questions, or need any real estate assistance, please reach out to Jon at 303-907-7668 or Kendall at 303-961-6459.