Greetings folks! It’s been a minute since my last market update, and the honest reasons are, 1) I’ve been busier than usual, and 2) Yeah I didn’t know what was going on either.
Let me clarify. I know what the market is/has been doing, but the perception of the market is having an impact like Vecna. Of course rates have played into fears, but I haven’t seen heebie jeebies from an otherwise healthy market since, well, ever. I’d love to draw comparisons to the bubble of the early aughts but this market is far different. I’ve used the phrase “perception vs reality” so many times in the last four months under varying circumstances that it should be our new slogan. Or change our name to Perception Realty?
EVERYBODY griped about the market over the last two years except my sellers that moved to Kentucky. Just yesterday I got another ad from The Coloradoan with the byline, “When Will The Housing Market Settle Down?” The majority of agents, buyers and, yes, even some sellers have wanted the market to chill out for years. So now I proudly present to you what appears to be a balanced market. Yay! Let’s party and cautiously buy some real estate without having to throw in a vital organ with the offer! But wait, why the long face? I’m reminded of a joke that may actually fit my monologue:
A horse walks into a bar. Bartender says, “Why the long face?” The horse replies, “My debilitating alcoholism is destroying my family and career”.
In my esoteric stretch of an analogy the horse is a buyer, and inflation, rising rates and historic price increases are the alcohol. And many buyers recently sobered up. It may appear that so many did it at the same time that they turned the strongest seller’s market ever into a buyer’s market in the span of a month. That’s the perception, right? In this case, that’s not really the reality. At least not all of it.
I’ve been asked many times if prices are going to drop, and I’ve always answered no, at least not in Fort Collins or the cities near the 25 corridor or Boulder. But then I cast a wary eye toward Greeley/Evans and add a disclaimer that their market is different. And it is, but we’ll get to that.
What we’re experiencing right now is an exaggerated version of our typical seasonality. If you’ve worked with me in the past I probably mentioned that the market slows to a crawl after the 4th of July. Pretty sure I’ve used the term “kiss of death” a few times when talking about a property going back on the market after this magical date. “But Crip,” you say, “That’s like the Gremlins rule where you can’t feed a mogwai after midnight. It’s kinda always after midnight, ya know? So isn’t it always after the 4th of July?” Let’s not get too carried away - I know Gremlins never made it clear what time you could safely feed them again but I assumed it was sunrise. In our not-so-magical world, the market picks up a bit after kids are back in school for a few weeks, so typically early to mid September. So expect things to stay slow until then, and I wouldn’t expect it to come raging back like Stripe, but it will be a little busier.
Getting back to Greeley and Evans, their market has always been a somewhat exaggerated version of the housing index. This was the case back in the day and I can tell you from first hand experience that it’s the case right now. There are other factors too, but mostly the reasons we agreed on earlier: rates, inflation and historic housing costs. And this exaggeration is compounded by the squared factor of our current seasonality.
At this point I had a bombardment of boring stats written down, but that’s the summary in itself - it’s boring. There aren’t tons of differences between the areas in terms of days on market and absorption rates, other than they’re much slower than they were a month or two ago. But between slower absorption and its byproduct of price reductions, this seems to be a signal to people that prices will drop.
Again, I’m sorry to report that this isn’t the case. Lower year over year prices equal lower values, not price reductions. Remember we’re coming off another historic spring/summer season. My last two listings went $49,000 and $200,000 over the asking price, and they closed less than two weeks ago. The neighbors are going to use those as comps for a while and although, yes, those were/are the market values of those homes (because that’s what the market was willing to bear), the perception at the time was that overbidding was necessary in order to secure the home. This will NOT be the case moving forward until our Gremlin sunrise, which in our case is spring.
Getting into specifics about perception v reality, here’s an interesting case study on those two recent listings. The perception of both was that overbidding was necessary because of competing offers. The competing offers were reality, yes, but did the winning buyers need to overbid as much as they did? In one case, yes. In another case, not at all. In both cases, perception became reality.
One issue that will further complicate markets like Weld county: new construction. It’s the supply/demand, monkey dealer scenario. And I think there’s going to be too much of it out in areas largely dominated by metro districts. One prediction is that deep-pocket investors like Greystar will be buying them up as rentals. If this comes to pass, instead of half-realized subdivisions on life support, dominated by foreclosures and short sales, you’ll have quasi-affordable rental housing. Don’t know about you but I much prefer the latter because I spent years trying to sell the former, and aside from getting to ridicule bad paint, it really wasn’t that fun.
I do have a couple predictions of my own. Firstly, stats will be twisted to suit the narrative. For example, the combined average price of houses and townhomes in Fort Collins sold in the last month was $603,915. During the same period in 2021 the average price was $535,990. That’s a year over year increase of about 12.5%. My prediction is this will drop to about 7% when we’re looking at 2023 vs 2022, which would put July sales at an average of $646k. However, the headlines will be PRICES DOWN 5% with later explanations that it’s 5% lower than the previous year over year percentage increase.
Secondly, since we appear to be in a recession expect to see vacation homes leaking onto the market in growing numbers. If you've been looking for a mountain property for a while, this will be your year.
In summary, we’re in the slowest time of the year which makes it the perfect time to buy if you have the stomach for the rates (or cash). Instead of turning this into the longest update ever, I’ll simply point you toward the update I wrote in September of 2019 about the best time of the year to buy (SPOILER: we’re coming up on it).
Got any thoughts? I’m sure you do, so send them my way! Cheers, Crip