As the snow falls, I wonder how many lollygagging Halloween decorations are getting wrecked right now. Some of our stuff is out there too, and even though it says "For Indoor and Outdoor Use",  I've noticed smaller print below that listing all of the parts and components that aren't waterproof. Soooo, I guess we're living life on the edge these days. We're down one holiday with a few left to close out the end of the year, so hang in there and enjoy the precipitation.

Speaking of tricks and treats, let's talk about the real estate market!
 
That's me putting this market update together. Just read on... you'll see.

Word of the day is Prognosticator;
a person who foretells or prophesies a future event.

There's a lot of prognosticating going on out there these days, especially when markets are the subject material, and their accuracy seems to be all over the board. The truth is, I don't think anyone really knows, but they have to say something to keep the clicks and the views and the likes coming in. The real estate market is still being weird, and I'd sure like to not have to prognosticate, but as someone reminded me the other day, that's my job! I'm going to kind of cheat the system though, and tie in some past data points with present ones using a few charts that I put together; but I'll say it again, I don't think anyone really knows where it's going!
 

First, the big question: the causation (or lack thereof?) between mortgage rates and sales prices. I used La Plata County, not just Durango, to work with a wider set of data from March 2017 to present.

Mortgage rates are getting pretty high -they've essentially doubled since the beginning of this year- and they're supposed to go higher if the Fed keeps doing it's thing: raising rates to "reign in" inflation to make money more expensive and remove it from circulation. This comes with the hopes and dreams that if people can no longer afford to "buy" money to buy stuff, demand would decrease, supply would increase, the markets would react and prices would come level off; or in real estate, perhaps decrease. Unfortunately, when the only tool you have is a hammer, the correction can have some painful side effects; cracking eggs to make omelettes if you will.

In the context of this chat, that means correcting real estate prices, in La Plata County's case, one that's gone up about 40% in the last two years, and 15% from this time last year. Looking at the graph above, I'm not so sure La Plata got the memo. But, the graph below tells another story.
 

The above chart shows the % of list to sold price over the last ~2 years in La Plata County across various price points. So if a property was listed at $800K and closed at $784K, it received 98% of list price. Look at what's happening up there! After generally hovering around 100% list price received for over a year now, if not above, that amount has steadily decreased since June of this year, when the average was 101.1%, and is now 97%, averaged across all price points.

This is one of those "weird" things happening: prices are still going up, despite rates going up and properties selling below list price. I think this is currently a sign of a returning healthy real estate market. What I mean by that is
  • We're not seeing those bidding wars driving prices up anymore
  • Buyers are able to negotiate again
  • Despite Sellers coming down on their list prices, the real estate market is still appreciating, as one should. I think there's more correction coming, especially as we go into the Winter. I bet we'll see percentages in the above chart continue to decrease until sales prices level out a bit.
The challenge is that there's a disconnect between Buyers and Sellers. Sellers think their properties are worth what they were prior to Summer (or more!), while Buyers taking a loan out have had their purchasing power crushed by increasing rates. Assuming the median sales price of a home in Durango of $715K and 20% down: the monthly payment from a purchase 3 months ago if made today (7.3% avg 30 yr rate) would be ~23% higher. I'll come back to that math in a bit.

Remember last Spring/Summer when the prognosticating started up about how silly it was to buy, and wait for the impending crash? The avg 30yr rate was 3% last June, and the median sales price in La Plata was $571K. Again, assuming a purchase today @$715K, 20% down, excluding taxes/HOA/insurance, the monthly payment would be 103% higher on today's purchase. I don't bring this up to salt the wound, nor to inspire urgency, but as caution to putting someone else's speculation ahead of your personal needs. Remember, most "experts" didn't think we'd see rates above 5% this year.

Let's go back to the math from 2 paragraphs above. To be painfully accurate, we should be comparing the median price and rate at the time to today's price and rate. In August in Durango, the median price was $615K and the avg 30yr rate was 5.3%. Assuming 20% down on that, purchasing a property at today's median price and rates, the monthly payment would be 36% higher. That's what needs to sink in for Sellers and the point I'm trying to make, that in the last 3 months alone, Buyers have lost a third of their purchasing power, so it can get pretty tricky pricing a new listing at yesterday's comps, we should be in a declining market by now, but we're not.  Welcome to Durango!

 
I'm ending on one last graph and note. If you've made it this far, kudos! Either you're really interested in southwest Colorado real estate, or you're really trying to draw out that bathroom break.
The point I want to make with this chart is that all the prognosticators in the media, on the news, the youtubers, social media, the email newsletters, they might be able to speak to general sweeping market conditions, but if you're serious about buying or selling, you really need to dive into your local data. It could be easy to look at my MLS as a whole and say, yeah, look at those days on market, inventory is starting to sit. La Plata County tells a similar story. But homes in Durango? Despite all the doom and gloom of high rates and sales prices that continue to rise, the DOM is going back down, there is still demand to buy here.  A well cared for property, especially one in town and updated, and priced reasonably, should still go under contract within a week or two of hitting the market.

And those properties that don't sell? The ones that are sitting on the market for 2+ months? Keep an eye out for price cuts by motivated Sellers, there are deals to be had! I just helped some clients purchase a home at 22% below list price, even when the appraisal still came in well over the sales price.

Moral of the story? This market has a lot of people scratching their heads, no one really knows what's going to happen next. A lot seems to depend on the Fed. Maybe we're already in a recession. Maybe a bigger one is about to hit? Maybe we're over the hump, which makes you wonder when you see that Starbucks saw increased sales and higher quarterly earnings than expected!