Buyers are finding that newly listed homes in many local markets are selling quickly. One moment, the listing is on the market; the next it’s gone. This “disappearing act” is becoming quite common.In many cases, on the very first day a listing hits the market, multiple offers are received and the property is under contract before the clock strikes twelve that night. If buyers are not paying attention, a listing may come and go before they even realize it was on the market.
This “disappearing act” is not the norm in all markets, and is certainly much more prevalent in lower price ranges. That said, let’s see if the market data supports these anecdotal stories of listings flying off the shelf.The available inventory of homes for sale across all Front Range markets fell in April to 3.8 months of supply. This lack of inventory is remarkable considering it is an average of all price segments, and as a result, includes upper price segments where supply is often much greater than six months. An average this low indicates virtually non-existent inventory at the lower price ranges, hence the “disappearing act.”
In the Colorado Springs market, the supply of inventory remained below the six month benchmark at 4.4 months and continues to tighten. Transactional volume is up on a year over year basis, but probably not as much as it would be if the market had more inventory. The lack of inventory is actually choking the market a bit.There are many ready, willing and able buyers in the market who simply cannot find a property to purchase. They are getting beat out in multiple offer situations and may be on their fourth or fifth attempt to purchase.Even with these impediments, transactional volume is surging this year. The volume of real estate that closed in April across all Front Range markets was up 21.3% over last April.In Colorado Springs, sales volume was up 6.5% year over year in April.So where do we go from here? How does this inventory shortage play out?The immediate effect of the constrained supply is that prices are rising. Positive appreciation rates of 2% to 4% are already being reported, and as noted in this newsletter last month, home price index data lags the market by months, so expect the news of price increases to get even better in the coming months.As the news of rising prices gets out, potential sellers who have been holding off may realize that now is not such a bad time to sell. Even home owners that assumed they were underwater may find the recent gains in home values allow them to sell without taking a loss.The end result should be more homes coming on the market. This increase in supply will have a positive impact on the market, with inventory levels moving back toward the six month benchmark of a balanced market that favors neither buyers nor sellers. The market would even welcome more foreclosures and short sales to meet existing demand.Overall, look for a stable market that delivers modest appreciation of 3% to 5% in 2012 for home owners, and also offers buyers a growing selection of inventory so they can take advantage of low interest rates