A History Lesson

With the stock market on a wild ride and the Dow Jones dropping nearly 1,000 points yesterday, it makes some people wonder if the local real estate market might also crash or at least “correct.”

A little history lesson is in order.

Over the last 40 years, the real estate market along the Front Range has averaged 5.5% appreciation per year.

The highest appreciation in one year was 15.9% in 1994.

The lowest ever was -4.0% in 1982.

The last time Wall Street was in turmoil and the stock market was plummeting was 2008.  This was, for many reasons, the worst economy of our lifetime.

That year real estate along the Front Range dropped 2.2%.

Meanwhile that year the Dow Jones fell 33.8%.

Bottom line, our market has no history of crashing or even experiencing a major correction.

Why is that?

The answer is fundamentals.

Our local economy has inherent fundamentals that insulate it from big downturns.

We have an incredibly diverse economy which is not reliant upon a single industry.  We have all the way from health care, to technology, agriculture, oil and gas, major universities, and financial services (just to name a few).

We are a global destination with a major international airport.

Oh, and the quality of life here isn’t too shabby.

Prices of real estate, just like prices of anything, come down to basic economic principles of supply and demand.

Because of our diverse economy and desirable quality of life, there has been strong, consistent demand for housing along the Front Range.

While there may be little bumps along the way, over the long term our market has proven that it performs.

Posted on March 6, 2020 at 10:20 pm
Meaghan Nicholl | Category: Economy, Fun Facts, Windermere Real Estate | Tagged , , , , , , ,

Bubble Burst

Every so often we will hear a concern that another housing bubble is forming.

To help answer that question it’s valuable to look at the reasons that caused the last one.

There were three main drivers of the bubble that burst in 2008:

  1. Easy Credit – loans were very easy to attain
  2. Over-Leverage – people were using their homes at ATM’s
  3. Over-Supply – too many new homes were being built

Now, let’s compare that to today:

  1. Stricter Credit – the average home buyer today has a FICO score of 755
  2. High Equity – collectively, U.S. homeowners have $19 Trillion of equity in their homes and collective mortgage debt has not increased for 13 years
  3. Under-Supply – today we are building only two-thirds of the new homes being built in 2004 yet the population is much higher

Given this healthy information, we don’t see another housing bubble forming today.

If you would like to see a video recap of our annual Market Forecast you can watch that HERE.

Posted on February 21, 2020 at 5:00 pm
Meaghan Nicholl | Category: Economics 101, Fun Facts, Uncategorized | Tagged , , , , , , , ,

Supply and Demand

Northern Colorado gave us a real-life economics lesson in January 2020.Compared to one year ago…

·         Inventory was down 10% (Supply)

·         Homes under contract went up 31% (Demand)

·         Prices were up 5% (Result)

If you would like to see a video recap of our annual Market Forecast you can watch that HERE.

Posted on February 8, 2020 at 6:20 pm
Meaghan Nicholl | Category: Fun Facts, Windermere Real Estate | Tagged , ,