Why I Disagree with Westword and CoreLogic
CoreLogic released a report this week that Westword quoted and everyone is talking about. CoreLogic estimated Denver to lose 10% by Spring of 2021. Yep, your clients are reading this and questioning if now is the right time to buy. (P.s. maybe use this article to push your sellers .. we NEED the inventory!)
But back to buyers…
CoreLogic’s report released on July 7th, highlights data from May showing national appreciation up .7% month over month and 4.8% year over year… this is incredibly strong for May and especially a May inside a pandemic. For reference, CoreLogic forecasted a 5% year over year gains until the most recent few months.
Frank Nothaft, Chief Economist for CoreLogic quoted “Pending sales and home purchase loan applications are higher than in May of last year and reflect the buying activity of millennials. By the end of the summer, buying will slacken and we expect home prices will show declines in metro areas that have been especially hard hit by the recession.” Nothaft expects home price growth to stall in June and remain that way throughout the summer predicting a .1% price decrease in June and a year over year decline of 6.6% by May 2021. This will be the first decline they’ve predicted in 9 years and is predicated on an increase in unemployment rates.
So let’s talk about Denver. Megan watches a 7 county area and she posted a positive monthly median price change of 2.1% and a year over year median price change of 3.7% in June. DMARs 11 county area also showed gains of 1.73% month over month and 4.56% year over year for June.. much stronger than CoreLogics estimated .1% loss. This really isn’t a surprise since historically Colorado runs hotter than national housing numbers.
Other supporting statistics include: Colorado has seen a net 2.6% population gain year to date… fueling buyer demand. Our unemployment is lower at 10.2% in May compared to the US at 13.3% (16.3% after adjustments). Our wage growth prior to COVID was #2 in the nation. Colorado has the 5th highest percentage of millennial population. PLUS.. on the housing side… our June 2020 Pending was 27% higher than 2019 as well as the average for the last 6 years. On the flip side our Active Listings were 33% lower than last year and 43% lower than the last 6 year average.
Just for fun let’s compare the home value loss we saw in 2008, the bottom of the Great Recession. Nationally housing lost 18% of their value in 2008. Comparatively, DMAR stats shows our 11 major counties lost 11.2% in value. In 2007, 2009 and 2011 we lost only 1 to 3%, as our market stabilized and poised itself for an incredibly strong recovery.
Back to 2020.. from May to June our MOI was cut in half in every price category for detached homes as buyers turn their focus to more space, additional office space, a backyard, less shared accommodations, etc. The attached could pull away and its effects on overall appreciation numbers will be felt. From a lending perspective, attached dwellings receive higher interest rates because they are a riskier product. They tend to be first to lose value in a down market and last to gain value in an up market. With the additional pressures of a health pandemic, and the increase in new construction condos recently hitting the market… this is the wild card that I will be keeping an eye on.
For now, I feel confident that our market will remain strong overall, giving our buyers continued appreciation and a safe place to call home. Will that appreciation flatten? It could. But will they lose 10%? Outside of the move away from downtown condos… I can’t see that happening.
Want to read the CoreLogic Report, here’s the link:
Did you watch the Market Update Megan Aller and I did on Friday?
We dove into this topic as well as Megan’s detailed real estate data and my macroeconomics, helping you be the best advisor you can for your clients. If you missed it, click the video below to hop over to our private Facebook group. If your not a member yet, just ask and we’ll make that happen right away!