Persistent low inventory of homes for sale has created a strong seller's market in Fort Collins CO. Three months ago, I shared some data with you that suggested that strong buyer demand in the low-to-mid price ranges was propagating into the higher price ranges.
The data below expands a bit on that earlier analysis, comparing low, mid, and upper price range data for the 1st six months of each of the last three years.
2013 was the beginning of the low inventory/high demand situation. Prior to 2013, inventory hadn't been particularly high, but before the region's strong recovery from the 2008 financial crisis, demand had been much lower and the market was in a more balanced state.
But when demand began rising, inventory did not respond as expected, perhaps because of uncertainty about the economy. Many potential sellers decided to sit it out, at least for a while. Where we are today is with them still waiting, while buyers compete vigorously for the limited inventory, driving prices higher.
Home Sales
It's a bit startling to look at the graph above and see a sharp decline in sales in the Under $300K price range - but the inventory is simply not available to meet demand. Affordable homes have become increasingly scarce, and a once substantial segment of our real estate market has all but disappeared.
As a consequence, it appears that buyers are moving into higher price ranges when they can. This is most evident in the $330-$450K range, but there has been improvement even in the $450k+ range.
It's a bit worrisome that much of this ability to move up a bit has been supported by low interest rates, which are likely to rise at some point in the not-too-distant future.
Home Prices
Median home prices have been moving steadily upward, especially in the low and mid-price ranges. While the data points simply reflect the prices of specific home sales for each period, increases in home value can be correctly inferred from long-term trends. And these increases are supporting, to some extent, the ability of sellers to afford replacement homes in higher categories.
Market Performance
Homes are selling faster, again with more impact in the low and mid price ranges, but improvement is visible throughout. It's worth noting here that, except for cash transactions, these numbers all have a 30-45 day typical time add-on for loan processing. But it is also interesting that we're seeing much higher numbers of cash transactions than in the past.
In the chart above, we have the strongest evidence of the existence of a seller's market. In the low and mid price ranges, homes are selling for more than asking price. There is strong buyer competition and multiple offers are common. Seller concessions have been replaced by buyers not only offering more money, but also by removing sale contingencies and accommodating sellers on contract terms and conditions.
Prognosis
At some point, as prices rise, there will be sufficient incentives for fence-sitting potential sellers to put their homes on the market. We're not seeing this yet - inventory gains to date appear to be seasonal in nature and well below what would be needed for market balance.
It's unlikely that demand will lessen. The regional economy is strong, with significant growth in jobs expected over the next several years. So until more inventory becomes available, we'll continue to see a seller's market in operation.
While the data above are for the Fort Collins market area, we're seeing a similar story in all of the northern Colorado markets. This is expected since the economy and labor force are, in fact, coherently regional in nature.
It's safe to say that, for probably at least the next couple of years, it's going to be a great time to sell real estate in northern Colorado, and likely a challenging for buyers.
If you'd like to take a look at the available inventory, check out Homes for Sale in Fort Collins CO. If you see something interesting, please give us a call - we'd love to schedule a showing for you at your convenience.
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