Friday Update February 10, 2023

Well how about this for the unexpected?  Our inventory dropped significantly since last week.  We're at 852 single family homes on the market this week down from 1,228 last week.  We saw a general decline in interest rates over the last couple of weeks and an increase in mortgage applications.  Activity on the market in general has been much more lively than any time since fall.

Last year we had 253 homes for sale just for perspective.

YTD we had 790 units closed out in our MLS with a median sold price of $435,000.  That median dropped a good 10k since last week and we will keep a super close eye on it.   Last year same time frame we had 1,217 closings for a median sold price of $443,000.  Last year the median sold to original list price ratio was 101% and today its 96%.

The sold to original list price ratio is pretty important.  We also have a sold to list price ratio which is worthless.  Check it out.  I list your house for $1,000,000 because that's what you think it's worth and I feel like all exposure is good exposure.  I'm stupid and desperate, you're stupid and ignorant, we're like a match made in heaven right?  But turns out your house is only worth $400,000, and after a series of long dreadful talks we finally bring your list price to $400,000, and it sells!  I then take my thirsty Realtor self to social media and tell the whole world how I just sold this house for FULL PRICE!!!!  I'm a rock star despite you probably hating me for not getting you that other 600k you wanted.  So the point is sold to original list price on this would be 40%, while sold to list price would be 100%.  One metric is accurate, one is worthless, the MLS offers both.

The sold to original list price now is similar to what it was in like 2011 or so.  It shows a disconnect between sellers' expecations and buyers' reality.  But it's cool because people are starting to get on the same page as our uptick in sales volume seems to suggest.

A friend of mine here in the Springs is a really good Realtor.  Said friend has been selling houses for almost 30 years.  Friend tells me that when interest rates genuinely become restrictive like they did recently and did many times before the market becomes like an ocean.  A wave of buyers comes in, rates go up, that wave of buyers goes out.  Rates go down, a bigger wave crashes ashore with all the old buyers and new ones too.   We have an ebb and flow of buyers coming in when rates drop and fading out as they go up.  This is super easy to see in the weekly mortgage applications.  Last couple of weeks have seen a solid gain in apps.

Interest rates remain pretty volatile.  We saw a good drop on the 10 year notes to below 3.5% over the last couple weeks.  Well no more.  10 year is at 3.74% and the 3 month is at 4.77%.  I've been talking about that yield curve inversion a lot, its still there, still unresolved, still waiting to cause major problems.  The inversion is putting pressure on mortgage rates still as well as the bond market as a whole.

Michael Burry famous from the movie "the Big Short" seems to think the worst for this financial cycle is still ahead of us.  I tend to agree.  Many others think we've made it through the dowturn already.  Someone is gonna be wrong and if history is any indicator it will probably be me.  We will see though.

Here's what I think guys and you've heard me say this before.  What I think is that real estate is a long,  term investment and should be treated accordingly.  I also think that if your alternative to buying a home is renting a place in a city you intend to live in for a while then the gamble of buying a home is always worth it.  Because if you think about it at all you'll know that renting isn't a gamble at all as you're guaranteed to lose 100% monthly, and home ownership is only a gamble if you intend to sell.  The cool thing about long term investments like housing is that if you don't plan on selling, you don't have to worry about values, and just keep living there, yo!

I'm saying this because my smart friend says it feels an awful lot like 2007 out here.  A lot of optimism, a lot of "we made it, the worst has passed".  A lot of hoptimism mixing with some seriously shit economic indicators.  And look, 2008, 2009, 2010, 2011, 2012, 2013 were not great years for sellers.  I remember going to listing appointments in 2014 and 2015 where people we're just barely breaking even on selling houses they bought in 2006 or 2007.  And that sucked.  But fast forward to 2022 and those 2006 buyers absolutely murdered it on their sales seeing values close to triple.  Point being the market moves in cycles and our jobs as investors and individuals is to remain solvent enough to ride through the bad so we can have lots of options during the good.

I'm not saying that next year is gonna be 2008 all over again.  I'm just saying if it is how are you positioning yourself to take advantage of it?  Because when other's are fearful, well you know what to do.