The availability of homes for sale has been one of the major factors responsible for what has been happening in the Fort Collins CO real estate market during the last two years. While the regional economy has shown good signs of recovery, portions of the real estate market - particularly in the lower to mid-price ranges - have performed as if the market were in a full expansionary mode. Prices are rising and multiple offers are common as buyers compete for available homes.
In the spring of 2011, the number of homes on the market began a serious decline, dropping by the beginning of 2012 by more than 50%. We believe that the reason for this decline is based on sellers' skepticism about the overall strength of the market, feeling that their home would not sell for a desirable price. Those who had no compelling reason to sell withheld their homes from the market, perhaps waiting for more favorable conditions.
It's interesting to note that this same phenomena was occurring in many markets across the country - but often for different reasons. For example, in those areas where housing prices plummeted after 2008 and have not yet recovered, many sellers who were upside down on their mortgages simply could not afford to sell.
It's not surprising that the low inventory levels have impacted market performance - when homes are in short supply and buyers are actively competing, the homes are going to sell faster. But it isn't exactly obvious from looking at the chart below. There are two other factors that need to be taken into account in interpreting the Days on Market trend line. The first is lag time - low inventory effects take some time to impact the market, plus they are measured from when homes' sales are recorded, which are typically 30-45 days from when they actually go under contract. Second, there are seasonal effects that are in play - the trend line peaks correspond to our slower winter months, when homes take a bit longer to sell. So if you move the trend line a bit to the left and soften the peaks, the picture becomes clearer.
Inventory is increasing - in response to increased demand and rising prices - and we are approaching more normal levels. So it's reasonable to expect that days on market will also begin to increase and market performance will return to more normal levels as well. And that's what we're seeing.
If you are interested in following northern Colorado market conditions as they occur, take a look at our Mary & Dick website and bookmark our Market Report section, as well as this blog - we post updated data regularly. If you can't find the specific information you're looking for, please give us a call and we'll get whatever you need.
Mary & Dick Greenberg
Data Source: IRES MLS