First Friday Update February 6, 2026

Welcome to February and this one is going to be short, sweet and just the data.  

Today we have 1,706 existing single family homes for sale in El Paso County.  Last year we had 1,364.  Inventory is up by over 25% year over year.  Remember the sentiment that sellers are still trying to cling on to was set when our inventory levels were below 300 units.

Interest rates.  Boy for something volatile they sure have been steady.  Basically from the day that 2/1 and 3/2/1 buydowns became a popular concept that was exactly the day that rates stabilized into a range.  The good news from a macroeconomic perspective is that rates did stabilize.  The bad news is that they're not low enough to make the existing housing prices "affordable".

Why would rates go higher?  Well let's pretend that the United States is a household and break down the following 3 graphs.

This one simply shows the national total debt accelerating higher.  This alone just shows that the American family is taking on more and more debt in dollar terms and not repaying the principal at all.  This alone demonstrates that we are an irresponsible borrower but thanks to the money printer in our family's basement the total debt can get watered down with new money.  By itself this is only a part of the picture.  But if you're on the outside looking at our family you might think to yourself that we're not very good with money, that we seek quick rewards over slow and steady investment, and that our money may not be good money down the road.

This one here is our budget balance.  This one is interesting honestly because I haven't really looked closely at it before.  Notice how the budget was generally balanced up until WW2 where obviously war time spending caused a dip into the red.  Then the interesting part is where the line separates lower for the first time to start the trend we're seeing now.  That line separates finally at the time that the United States leaves the gold standard.  As in the moment that the United States could easily print money to deficit spend our American family did exactly that.  What it lead to was the highest inflation rates and then ultimately the highest interest rates that the baby boomers got to live through.  Notice the last budget surplus right before the tech bubble burst?  Those were truly the best of times right there when our American family was at its peak.  We had vanquished all our enemies, we sat on top of the world and it felt amazing.

Now this graph puts things into perspective.  This is our family's debt to income ratio or DTI for short. This is a little bit not apples to apples to consumer lending since DTI is calculated based on your monthly income vs your monthly expenses.  So lenders don't weight the fact that you owe 500k on a mortgage while only making 100k a year, that's not a 500% DTI.  But the point I'm showing here is that we as a country have debts that are rising relative to our income.  Like I mentioned earlier the debt growing alone in dollar terms is relative to the value of the dollar, which we have all seen greatly diminish over the last decade.  But the debt growing relative to total income (GDP) paints a much more real picture of the financial health of our American family.

The take away from these graphs is this.  The world still looks to America and believes in it.  While we've certainly had better days and years America is still the prettiest girl at the dance mostly because the other girls mileage is just wearing way rougher.  Other countries central banks, global investors, massive funds still see US debt as a safe haven and continue to invest in it.  That confidence and faith is the only thing keeping our interest rates within this range.  That confidence and faith is based on nothing more than belief in the nation, on our ability to continue being something good in the world.  It's not based on hard assets, its not based on gold holdings, its based purely on opinion.  If that opinion falters, rates go higher.

Just for fun let's look at what can happen to interest rates in countries that the world has less faith in.

Japan is interesting and we will likely be talking about Japan quite a bit over the next year or two.  This is a macro nightmare for the carry trade that will ultimately impact our markets.  Japan's rates have not been market driven since like 1989.

Regarding China a lot can be said.  Command economy with the government manipulating rates lower to stimulate spending.  True.  Growing world power with increasing relevance and increased outside buying of its bonds.  Also true.  China is the elephant in the room of the 21st century without a doubt.

And this one shows you what a war time economy in a country that misjudged the size of it's britches looks like.  That interest rate too is suppressed by Russia's central bank buying its own bonds at the cost of rapid inflation for the citizens to deal with.

Now let's zoom back into El Paso County.  We sold 637 units in January of this year at a median sold price of $469,950.  Last year we sold 696 units so we're looking at like a 8.5% drop in sales volume year over year.  Compare that to peak FOMO January of 2022 we're down 40% in sales volume.  What is remarkable is that the January 2022 median sold price was $445,000 as in lower than today.  As I've mentioned before this value is very deceiving and skewed by the number of higher end houses selling in proportion to the lower end.  

The truth in this market are deals like this.  Listed at 345k and sold for 325k in 3 months with 15k in concessions.  Listed for 375k, dropped to 365k and under contract at 350k with 9500 in concessions in 3 months on market.  Listed at 525k and sold for 470k with 6k in concessions with a new roof, new sewer line and electrical panel after about 2 months on market.  The amount of stories both within our shop and outside of it where offers are coming in 100k or more below list price is remarkable.  

In market terms when supply and demand fall out of balance you get a widening of the bid/ask spread.  That's what we're seeing in housing.  Ask(listing price) 700k.  Bid (offer) 600k.  Now leave it to the Realtors to figure out the middle, likely without pay.  Bid ask spreads widening in markets is normal in times of low volume, these are basically consolidation periods where the market slowly sputters along without choosing a direction.  But the wide bid ask spread means that on the outskirts of average someone is paying too much and someone else is getting a steal.  Also this means that the market is susceptible to large moves when new data or sentiment enters the equation.

Stuff like this for example.  Biggest layoff numbers since 2009 can certainly wear on a housing market.

https://www.cnbc.com/2026/02/05/layoff-and-hiring-announcements-hit-their-worst-january-levels-since-2009-challenger-says.html

And in conjunction with that foreclosures are for sure becoming more common.  Foreclosure starts are up about 31% over last year and are really just now starting to ramp up as lenders are finally able to process Covid era bad debt.  A more telling stat locally is the actual number of foreclosure sales held.  We're up over 100% year over year and I expect that trend to continue through 2026 and into 2027.

I'm not saying this to be like an alarmist or as a reason to panic.  As I've said for years now the best thing that can happen to this market is a correction.  We need it worse than ever before and I finally see signs of it happening.

The healthy progression is like this.  Softer job market.  More foreclosures.  Pressure on pricing from distressed properties.  More foreclosures as equity positions disappear.  Accelerating but uneven price drops that will be wildly regional and market dependent.  At some point the situation hits our goldilocks zone.  Things are bad enough that the Fed drops rates and relaunches the money printer.  Sentiment is low, buyers are unmotivated, and mortgages again fall in line with or below rents.  This is where the market bottoms and bounces from and this is what we need to see in order to see a healthy and once again appreciating housing stock.

 The reason that I'm personally ok with buying now as I'm actively looking to do is that I know timing the market is a fools game.  I see that the FOMO is gone.  I see the fear entering the picture.  I know that whatever I buy is going to be a long term hold so value fluctuations over the next decade don't concern me.  If your view is like this then buying a house today and into the future is going to feel like fun.

However if you want to speculatively buy a house today to sell it in 3 years for profit you're gambling.  I'm going to tell you you're gambling.  I'll try to talk you into renting.  I'll try to show you how much money you will lose by becoming an accidental landlord.  I might lose you as a client to an agent that's willing to lie to you and tell you what you want to hear.  I'll sleep well at night.

We're getting into the fun part of the market cycle, the part I'm good at, and I'm happy to help you navigate it for looooooooooong term gains.