Windermere Principal Economist Jeff Tucker analyzes the National Association of REALTORS’ September U.S. home sales report, what the findings say about the current housing market, and why mortgage rates have been rising in recent weeks.
Friday Fun Facts – Have We Reached a Balanced Market?
Friday Fun Facts – 3-D Printed Homes
Last week, over 300 people gathered in Greeley, Colorado, to witness the groundbreaking of the largest Habitat for Humanity project in the state, which will feature 3D-printed homes. Alquist 3D, a concrete printing company, showcased its technology, using a robotic arm to layer concrete for walls instead of traditional materials like lumber.
Alquist, founded by Zachary Mannheimer, relocated its headquarters to Greeley due to local partnerships, including with Habitat for Humanity and Aims Community College. The company aims to make 3D-printed homes cheaper and more disaster-resistant than traditional houses. Currently, Alquist is working to match the cost of lumber-built homes but anticipates that large-scale production could reduce costs by 20-30%.
The Hope Springs project will consist of 174 Habitat homes and 320 apartments. Alquist’s initial task is to build two duplex homes, while 12 lumber-built homes will begin construction soon. Habitat’s local CEO, Cheri Witt-Brown, supports the technology but seeks to ensure it meets budget and family preferences before committing to further expansion.
Hope Springs will feature various community amenities and could serve as a model for addressing Colorado’s housing crisis. The project aims to combine nonprofit, private, and public efforts to create affordable housing options.
Source: Colorado Public Radio
Best Places
U.S. News & World Report just released their ‘Best Places to Live’ rankings and two Colorado cities made the top five list.
They rank the 150 most populated metropolitan areas on criteria such as employment, quality of life, and strength of the housing market.
Here are the top 5:
1. Huntsville, AL
2. Colorado Springs, CO
3. Green Bay, WI
4. Boulder, CO
5. San Jose, CA
New Rankings
The latest Home Price Index report has just been released by the Federal Housing Finance Authority.
They track home price appreciation for the largest metropolitan areas in the U.S. plus state by state appreciation.
Here is the ranking of the top three states for price growth over the last twelve months:
1. Florida = 29%
2. Arizona = 26%
3. North Carolina = 25%
The bottom three states are:
50. North Dakota = 10%
49. Louisiana = 11%
48. Minnesotta = 11%
Colorado came in at #19 with 18% price growth over the last 12 months.
Like 1993
Here’s a trivia question…
The number of new, single-family homes completed in 2022 will most closely resemble which prior year?
If you guessed 1993, you are correct.
Yes, the number of homes built and completed this year is no more than the number from 30 years ago.
In 2022, there will be just over 1 million single family homes constructed in the U.S. which is the same as 1993.
This is much more than the bottom of construction in 2011 which saw just under 500,000 new homes built.
But it is also much less than the top of 2006 which had almost 1.7 million.
Limited new home construction today is preventing anything close to a glut of inventory on the market which, in turn, insulates us from any sort of major price correction.
The “R” Word
Our clients wonder what a recession would mean for the real estate market.
Many assume it would translate into a downturn in prices.
Some even worry that it would cause values to come crashing down.
We looked back in history, at past recessions, to gain an understanding of what recessions mean for the Front Range market.
We used the extensive data from the Federal Housing Finance Authority to look at home price appreciation during the five recessions dating back to 1981.
What we found was quite interesting.
During the five recessions of 1981, 1990, 2001, 2008 and 2020, home prices along the Front Range went up in all but the 2008 recession.
What was unique about 2008 was that housing led the recession. Whereas the other recessions were triggered by some combination of inflation, oil prices, and stock market issues (plus the pandemic in 2020).
So, if the past is an indicator of the future, a recession is not guaranteed to result in lower real estate prices.
The Front Range real estate market has always demonstrated long-term health and a great resiliency to outside economic events.
See the chart below for the detailed research…
Asking Price Drop
Data just released by Altos Research shows that 35% of all homes on the market have had to reduce their asking price.
This is the highest this number has been since December of 2019.
This is also an indicator of sellers adjusting to the reality of the new market where overly aggressive pricing is not effective.
Extensive research shows the importance of pricing a home correctly on the first day so that the home sells in an appropriate time frame.
Two Week Snapshot
Here is a quick snapshot of our markets two weeks into July versus the same time last year…
Larimer & Weld Counties:
- Inventory up 61%
- Transaction count down 44%
- Prices up 17%
Metro Denver:
- Inventory up 62%
- Transaction count down 31%
- Prices up 12%
Still Behind
Single family new housing starts in 2022 will show an increase versus last year, will be the most since 2007, and will still be well behind the peak of 2006.
This year, experts predict that a total of 1.1 million single family homes will be started. In 2021 there were 970 thousand new home starts.
The peak occurred in 2006, when 1.65 new homes were started.
So, this year will finish 33% behind the peak.
When we are asked why today’s market is different from the ‘bubble years’ of 2004 to 2007, the difference in new home starts is one reason we cite.
Even though the market is cooling, we remain significantly undersupplied which insulates prices from any kind of dramatic downturn.