December’s Inventory Slump Indicates Timid Sellers | Guest Post

“We have so much time and so little to see”

Who watched Willy Wonka and the Chocolate Factory this Thanksgiving? It’s as traditional as A Christmas Story in December, and everyone wants their own golden ticket! Like the movie, real estate, especially in the Denver market, continues to provide that promise of wealth without the extraordinarily rare chance of winning a golden ticket.

The overall economics for Colorado are great for homebuyers with continued strength in Colorado’s job growth, increased affordability at all levels with sustained low interest rates, and a healthy third quarter GDP, all of which support our chances for golden tickets when we invest in the strength and stability of real estate.

Let’s dive into what’s shifting the economy, the struggle with inventory, and where we might land 2019, 2020 and 2021.

Economic Boredom

I read a headline just this week, “Steady as She Goes.” Honestly, I like it. What’s wrong with a calm, stabilizing market? Initial jobless claims gave us a scare this month when they headed up for several weeks, tipping the scales towards increased unemployment and the recession. However, at the end of November, national unemployment fell by 15,000 bringing good news and committing unemployment to its 50-year lows.

GDP also took a small turn for the better as it surpassed predictions of 1.9 percent to land at 2.1 percent on its second look for Q3. The uptick was due to slightly stronger consumer spending (up 2.9 percent) as well as durable goods’ move to the upside. Manufacturing activity (inventory and new orders) entered its fourth month of contraction, but not enough to offset consumer spending’s 70 percent slice of GDP.

Interest rates continue to dazzle us by staying below four percent. After declining for nine straight months, they have recently turned upward (only slightly) upon hearing the good news of the prolonged strength of the economy.

Inventory Woes to All

Inventory woes continue to affect us all. The National Association of REALTORS®’ Chief Economist, Lawrence Yun, noted residential sales continue to be strained by the lack of new inventory. 2019 was expected to be the end of the housing supply crisis, but since February, the year-over-year trend gave back the inventory we so desperately needed. After October squeaked by with only 0.21 percent more inventory than last year, November went negative ending with 7.2 percent in active listings. Home sellers seem timid despite the market continuing to offer them the advantage as a seller’s market.

2020/2021 Here We Come

Remember, real estate is a long game. The most important takeaway is where the housing market is as we close out 2019: The median home price is up 2.44 percent, year-to-date homes sold are up, units are up 2.17 percent, and volume is up 5 percent - meaning real estate continues to be the golden ticket for wealth creation.

Additionally, Freddie Mac just came out with their 2020/2021 predictions. Their economists expect rates to hover around 3.8 percent for 2020 AND 2021 and total home sales (new plus existing) to stay strong, increasing from 6 million in 2019 to 6.1 million in 2020 to 6.2 million in 2021. National home price appreciation is expected to stay low finishing 2019 at 3.2 percent, then 2.9 percent in 2020 and 2.1 percent in 2021.

Simply put, we expect continued affordability while providing growth in appreciation and opportunity.

So, what will next year really bring? Well, in the words of Mr. Wonka, “The suspense is terrible. I hope it’ll last.”

Nicole Rueth
The Rueth Team of Fairway Independent Mortgage Corporation

The views, opinions and positions expressed within this guest post are those of the author alone and do not necessarily represent those of the Denver Metro Association of REALTORS®. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.