Home Sellers: Buyers are Ready for Inventory Today, Not in Spring
Have you ever watched a puppy wrapped up in a blanket? They fight to get free with everything they have. No blanket can hold them in. Neither can the lack of inventory kicking off 2020. Buyers are pre-approved, can afford more home and feel like spending money. If it wasn’t snowing as we rolled into February, I would have been convinced it was a summer market in Denver.
The current psyche of the buyer is strong and millennials are hitting the prime age for home buying:
- 4.8 million Millennials turn 30 this year..Happy birthday!
- The rest of you are 22 to 39
- Over 40% of millennials are parents… which increases their homeownership rate from 38% to 80%
- 38% of homes purchased in 2020 will be from millennials
- 50% of the mortgages in 2020 will be secured by millennials
- 8.8-9.2 Million first time home buyers are planning on buying a home in 2020-2021 across the United States
- Denver Metro is certainly getting it’s share as the population grows to 3.3 million in 2020
Millennials are expected to accrue more wealth by the year 2020 where they are expected to spend $1.4 trillion. As Millennials pay off loans and get better jobs with higher salaries their spending habits are expected to change.
These first time home buyers are getting an additional boost because economically, we are steady and strong.
- Colorado wages gained 5.4 percent year over year at the end of 2019 (#2 behind Washington State)
- Unemployment is at 3.6 percent nationally; even lower for Colorado at 2.6 percent
- Spending is up .3 percent
- Job growth is up 2.6 percent but slowing
- GDP ended 2019 at 2.3 percent
- Inflation is muted
What’s even more powerful for home buyers? Continued low interest rates (3.51% with .7 discount) and a break from our double digit appreciation! The Federal Reserve Board met at the end of January citing the economic factors above were healthy. They also noted that they would continue buying T-bills at least through April 2020 to ensure the supply of reserves remains ample. This is expected to keep rates low through June 2020.
Affordability is up; the demand is real as mortgage purchase applications ended January up 5 percent month over month and 16.6 percent year over year; and home buyers are scooping up everything good that comes on the market. Two real estate trends that stuck out to me for January was even though New Listings were up 89.27 percent; Active Listings ended down 1.91 percent from December. The Median Close Price creeped up .52 percent as the bidding wars dominated the market. Closed Residential was down 34.21 percent due not to demand but low inventory. Only homes above a million have ample supply sitting at 6.92 months of inventory. Total Inventory in January was 4,941, which is obviously low. I had one Realtor email me on Saturday that his $400k listing brought in 44 showings and multiple offers on Thursday!
The seller’s psyche is still wrestling with the blanket. Those who price their homes right, spend the time and money to repair and stage, are rewarded by sitting on the market an average of 15 days. The 44.6 percent of them who think it’s a sellers market and are throwing their home on the market unready or too high are sitting for an average of 70 days and reducing their price to sell. Sellers are also in a position right now to gain. With tenure up to an average of 8.21 years fourth quarter 2019; their realized home price gain upon sale is at a 13 year high. Sellers, it’s time to capitalize on your profit, move to the home of your dreams, and release the much needed inventory. And those of you who are waiting for the “Spring buyers market” … all you are waiting on is to be joined by more sellers.
As 2020 continues to unfold amidst conversations of brexit, impeachment, the Coronavirus, and the election; the things that I am going to keep a keen eye on is job growth, unemployment, and consumer confidence. Because while manufacturing is still weak and the government is still spending, consumer spending is holding up our economy and the GDP.
The Rueth Team of Fairway Mortgage