Did The Market Shift?

Dated: June 10 2022

Views: 90

Is the party over?  It reminds me of the song by Semisonic, Closing Time. It’s been a good run, lots of fun had by all, but at some point the party stops, the lights turn on and you stumble into the Uber dreading the next morning. Will May of 2022 be the month we look back on as the month the market changed?  Will this be my last article where the sellers win every play and the buyers blink, only to lay down their cards and fold? Some of the data shows that just may be the case.  The biggest part of that data is the 52% increase in active properties.  And even though medium sales price was up again by 13.3 percent for single family residents, and days on market for them remained flat, we saw a 20 percent increase for townhomes and condos days on market. This is a pattern I have seen before. And it leads me to believe that by June’s report the days on market for single family will likely increase.

 

The news, simply, stinks. I have often reported to many of my friends that real estate will be the last to be hit. This is not ’08. The housing bubble that lead to the collapse of an entire world economy. No, this time it is the reverse. An entire world economy in collapse that may lead to the collapse of housing. It is impossible to believe that inflation at 8.5%, a negative growth GDP in the first quarter, gas and food prices soaring and housing remains this high?  Affordability far beyond what the local population can support? In the past, housing was a hedge for inflation. But this is a very different time. We ran home prices up artificially with low interest rates for a decade and then inflated more with FOMO(Fear of Missing Out) during the pandemic, then interest rates spiked.  We got here because of “Free” money and low rates. That money had to find a place to go. Investors were all in. Every chip was on the table and every chip was on real estate and stocks. But at some point the free money dries up, investors go and find a new place to invest their money and what that holds for the future of housing is anyone’s guess.

 

 

But all markets have cycles. The FED chair has stated that although they want a soft landing, they are willing to do what it takes to get the inflation THEY caused back under control. With that said, the landing is not likely going to be soft since we have no examples in our history of the FED getting it right. That means we should brace for impact. Maybe it’s not now, but sometime in the future the landscape of housing is likely to look very different than May did. And with that change I may be writing articles on how our buyers got a home with no competition, 10k below purchase price and 5k in concessions. It is hard to predict markets. Even NAR’s Chief Economist wiffed the ball when he predicted 4% interest rates for 2022 and then just 5 months later we were into the 5’s.  Many will read this and giggle, thinking that cannot happen here. Colorado is too amazing. Everyone is moving here. Our market cannot be touched because we have the military. And with that I will simply respond, I have heard that before, and that year was 2007. Never say never, it always makes us look foolish. 

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Patrick Muldoon

I have many interests and hobbies to supplement my busy career in real estate. Although I enjoy my work I also enjoy finding free time to enjoy the most important things in life. This includes being w....

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