After meteoric rises in home prices and rents during 2015 there are signs indicating some corrections are occurring in the marketplace. As far back as the end of 2015 we began to see changes in our dynamics. First we saw a flattening of prices even amid drastic and continued declines in inventory levels.
This suggested a possible cooling and exhaustion of the market.
These cooling signs have continued to proliferate through the first half of 2016. Even with a population increase of 102,000 people in 2015, the state only saw an increase of 25,143 new homes, condos and apartments. There has been a tremendous amount of apartment inventory introduced to the market which has slowed the increases in rents throughout the metropolitan area. It is still a tight market but there is some relief for tenants from the upward pressure on rents. As reported by the Denver Post, the state should have added 40,500 new homes, condos and apartments and the deficit only compounds the growing lack of housing that has been accruing since 2012. In 2012, the deficit was larger, at 19,000, with a population increase of just over 72,000.
With little inventory, battleground competition for homes, especially at the lower price point, and continued pressure on financial budgets, buyer’s interest is waning in the market. This lack of interest can be seen by the declining number of resale homes under contract over the last several months and the abnormally high fallout of properties under contract. Nearly 1 in 5 properties placed under contract is terminated by the buyer due to properties not appraising for the purchase price and/or sellers that are being unrealistically unreasonable in dealing with buyer requests for repairs.
Sellers are still reluctant to put homes on the market for sale fearing an inability to find replacement housing in this tight market. The solution I have explained for the last 2 years lies with new home builders building more homes and having standing homes available for delivery in a 30 – 90 day window. Until that happens and relieves some of the pressure on the resale market our market place will continue to be a battleground laid out with the carnage of unhappy and increasingly disenchanted buyers and fearful sellers.
It is still a great time for both buyers and sellers to engage in our market. They both however, need to take a step down from their unreasonable positions of recent years and find common ground where both can work to come to agreeable terms of a sale where everyone is at the closing table feeling good about the transaction. Don’t be fooled, with a dose of realism the time is still now to sell and move up or for those buying for the first time the opportunities are out there.