How will COVID-19 impact the national housing market?
Take-aways from Chief Economist, Matthew Gardner
- Expect a 10% -15% contraction in the number of home sales for 2020
- Contraction is anticipated to be brief and pick back up quickly
- Qualification and financing is going to more achievable than ever
- Low supply in new construction, but households are still being created which puts upward price pressure on housing stock
- Mortgage Interest Rates continue to remain extremely low and are expected to remain low
- Buyers are influenced by the economy and with 70% of the US economy being influenced by consumption and the stock market declining, buyers concerns of job security arise and the option to obtain a down payment from selling stocks is limited
- Take Action: Buyers, look for lending options that offer achievable money down and doesn’t create a risk for leveraging stocks or completely deplete savings during this uncertain time. Leverage the low interest rates while they last and understand how a decline in interest rates can significantly change your monthly mortgage, making home ownership more achievable in the long term.
- Inventory may drop as, depending on market, sellers may be hesitant to list
- Sellers may be cautious to open their home to potential buyers
- Take Action: Discuss virtual safe tours with your agent to keep your listings moving and buyers looking.
- Will we experience a recession in 2020? Yes, if the economy continues to see a shirk through Q3.
- How long will it last? Because there is nothing systemically wrong with the market, if a recession occurs, it will be a short term impact.
- The economy is expected to recover and to be much healthier than in the second half of 2020 than what is experienced in the first half.
- Note – A recession is two or more quarters during which the economy shrinks.
Most importantly! Order take-out, get coffee to-go, buy gift cards and find every opportunity to continue to support your small businesses and stimulate the overall economy. Action now will lessens the impact when we fully recover from COVID-19.
Are the national and local market and trends that are being fed to you credible? Is your real estate resource full of trustworthy statistics that enhance your knowledge of whether to buy or sell? Know that It is okay to ask for the source and credibility of the statistics that are influencing your future home buying decisions. It is only the biggest purchase of your lifetime.
When working with my clients I feel confident in the market trends and statistics that I provide. I leverage one of the most powerful resources in real estate, Matthew Gardner, Chief Economist at Windermere. Matthew is a well-respected economist with 28 years of professional experience in both the U.S. and U.K. In short, his strengths are in analyzing and interpreting real estate market trends, as well as accurately forecasting and delivering what to expect in the new year. If you are unfamiliar with Matthew and his influence, send me a request to receive our quarterly Gardner Reports to understand the significance of Matthew’s output, and most importantly our local market trends. Even Better!!! If you would like to experience Matthew firsthand, attend our Windermere Annual Forecast the January in Fort Collins and Denver. Contact me for more details and to RSVP as spots are limited.
The following analysis of the Metro Denver & Northern Colorado real estate market (which now includes Clear Creek, Gilpin, and Park Counties) is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.
Colorado continues to see very strong job growth, adding 72,800 non-agricultural jobs over the past 12 months—an impressive increase of 2.7%. Through the first five months of 2018, the state added an average of 7,300 new jobs per month. I expect this growth to continue through the remainder of the year, resulting in about 80,000 new jobs in 2018.
In May, the state unemployment rate was 2.8%. This is slightly above the 2.6% we saw a year ago but still represents a remarkably low level. Unemployment remains either stable or is dropping in all the markets contained in this report, with the lowest reported rates in Fort Collins and Boulder, where just 2.2% of the labor force was actively looking for work. The highest unemployment rate was in Grand Junction, which came in at 3.1%.
HOME SALES ACTIVITY
- In the second quarter of 2018, 17,769 homes sold—a drop of 2.4% compared to the second quarter of 2017.
- Sales rose in 5 of the 11 counties contained in this report, with Gilpin County sales rising by an impressive 10.7% compared to second quarter of last year. There were also noticeable increases in Clear Creek and Weld Counties. Sales fell the most in Park County but, as this is a relatively small area, I see no great cause for concern at this time.
- Slowing sales activity is to be expected given the low levels of available homes for sale in many of the counties contained in this report. That said, we did see some significant increases in listing activity in Denver and Larimer Counties. This should translate into increasing sales through the summer months.
- The takeaway here is that sales growth is being hobbled by a general lack of homes for sale, and due to a drop in housing demand.
- With strong economic growth and a persistent lack of inventory, prices continue to trend higher. The average home price in the region rose
9.8% year-over-year to $479,943.
- The smallest price gains in the region were in Park County, though the increase there was still a respectable 7%.
- Appreciation was strongest in Clear Creek and Gilpin Counties, where prices rose by 28.9% and 26%, respectively. All other counties in this report saw gains above the long-term average.
- Although there was some growth in listings, the ongoing imbalance between supply and demand persists, driving home prices higher.
DAYS ON MARKET
- The average number of days it took to sell a home remained at the same level as a year ago.
- The length of time it took to sell a home dropped in most markets contained in this report. Gilpin County saw a very significant jump in days on market, but this can be attributed to the fact that it is a very small area which makes it prone to severe swings.
- In the second quarter of 2018, it took an average of 24 days to sell a home. Of note is Adams County, where it took an average of only 10 days to sell a home.
- Housing demand remains very strong and all the markets in this report continue to be in dire need of additional inventory to satisfy demand.
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
For the second quarter of 2018, I have moved the needle very slightly towards buyers as a few counties actually saw inventories rise. However, while I expect to see listings increase in the coming months, for now, the housing market continues to heavily favor sellers.
Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.