I missed it
I thought for sure we would see a slight down-tick in activity in August. nope, I was wrong. Just the opposite, August was a record month in activity (homes going pending/under contract).
Having missed the mark on August, I am still not changing the story I have been telling most of this year: September and October are weird and typically shaky months leading up to a presidential election.
In any event, going back to the record sales in July and August: why are so many people buying houses? It got me thinking, again, what is really driving all that demand? Sure, unheard of mortgage rates under 3% helps, but that still doesn’t really drive demand – it makes things a little more affordable. I am not buying that as the only reason.
What about migration? People who are moving to Colorado from places like northern California, southern California, big cities in the northeast, and the like. Anecdotally I have come across what seems like an extra influx of people – not enough data though to make a formal assertion. Yet it does get me wondering: what if over the next 12 months we get another 100,000 (net) residents? What about 200,000? There is no way new home construction could keep up with that demand. There is also not enough single-family homes within the main parts of the city to handle all those people – they would have to go to multi-family or go to the farther out suburbs (where most of the new construction is anyway). Regardless of where they actually settled, the net effect on Front Range housing would be significant – all that extra demand would almost certainly force prices to rise, or at a minimum stay where they are. Even if Colorado and the country went into a deeper recession, the simple supply/demand equation would likely prevent much, if any, downward price movement.
I am not saying that will happen. I am also not an economist (at least nor professionally – but I did major in economics at UCLA), nor do I have access to detailed migration data. However, this migration scenario is possible. With many companies opting to continue employee work-from-home (WFH), people can now have more choice about where they live. Colorado is a fantastic place to live. While some of you natives may complain that things are “not the same,” there’s too much traffic, it’s too crowded, etc. – that is not going to stop people from moving here. Waking up this week and looking out to see snow across the Rockies – breathtaking. I never get sick of looking at that view.
So let’s see what happens the rest of this month. Do things quiet down in advance of the election? Do the stock market swings unsettle buyers? Can we get some good data on migration? (I am trying to find some data that is helpful). In the mean time, I suspect that we are so upside down on supply/demand that even if things “slow down” a bit, we may really see much change in pricing. Maybe all we see is less competition, which, if you are a buyer, means it makes things a lot less stressful in the purchasing process. That would not be bad.