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Buyers Waiting For Prices To Soften And More Inventory To Hit The Market

A report from the Denver Post in Colorado. “After hitting severe turbulence and taking a dive in September, metro Denver’s housing market stabilized at a lower altitude in October, according to the Denver Metro Association of Realtors. Agents report more sellers are dropping their asking price, more buyers are backing out of contracts and listings are taking longer to sell. New listings took 29 days to sell last month, up from a fast 19 days measured in June.”

“‘Interest rates are starting to affect affordability,’ said Nicole Rueth, a lender with Fairview Mortgage and member of the markets trend committee. Buyers face the dilemma of buying now to get ahead of future increases in mortgage rates or waiting for home prices to soften and more inventory to hit the market. Reuth said that indecision is contributing to a ‘stagnant’ market.”

“Jill Schafer, the new chairwoman of DMAR’s Market Trends Committee, said in the report that sellers are still in the driver’s seat in metro Denver. ‘It appears we still have a ways to go before we get to a buyer’s market. And that’s not just my opinion, that’s the story the statistics tell as well,’ Schafer said.”

“Buyers purchased 4,181 single-family homes and condos, a decline of 3.89 percent from the number of sales in September and 15.9 percent below the number of sales a year earlier. Sellers had 8,539 listings on the market at the end of October, down 3.04 percent from September and up 35.28 percent from a year earlier. The inventory of homes for sale dipped below 4,000 late last year and has more than doubled since. Historically the inventory for metro Denver has averaged around 16,000 homes, so the market remains tight.”

“But home price gains are slowing in metro Denver and median prices remain below the peaks hit last spring.”

From Reuters. “D.R. Horton shares fell more than 10 percent after the largest U.S. homebuilder forecast first-quarter home sales below analysts’ estimates on Thursday, the latest sign that rising mortgage rates and higher home prices are weighing on the housing market. The weakness in shares also hit other homebuilders’ stocks. PulteGroup fell 6 percent, while Lennar was down 4 percent. The broader PHLX housing index, down 22.3 percent this year, fell another 3 percent.”

“‘The buyer is probably affordably stretched and taking a little bit of time to reset to changing market environment,’ D.R. Horton Chief Operating Officer Michael Murray said on a conference call with analysts.”

“The company said it was seeing a rise in incentive spending for homes priced $300,000 and above. These kinds of homes make up about a third of the company’s total deliveries.”

“The homebuilder said it expects incentives to increase in the face of the choppy demand environment and forecast full-year 2019 home sales gross margins to be in the range of 20 percent to 22 percent, with the midpoint below analysts’ estimate of 21.48 percent.”

“Single-family homebuilding, which accounts for the largest share of the housing market, has lost momentum since hitting a pace of 948,000 units last November, which was the strongest in more than 10 years.”

“D.R. Horton said on Thursday it expects first-quarter home deliveries in the range of 11,000-11,500 units, below analysts’ average estimate of 11,852 homes, according to IBES data from Refinitiv. The company, however, did not provide any details of its sales and profit expectations for 2019.”

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This Post Has 11 Comments

  1. ‘Agents report more sellers are dropping their asking price, more buyers are backing out of contracts’

    ‘The company said it was seeing a rise in incentive spending for homes…The homebuilder said it expects incentives to increase in the face of the choppy demand’

    Cancellations and incentives?

    ‘waiting for home prices to soften and more inventory to hit the market’

    More inventory? Sounds like they aren’t buying the shortage thing.

    1. more sellers are dropping their asking price, more buyers are backing out of contracts

      At least it’s “stabilized”. A stable state of free fall.

  3. “After hitting severe turbulence and taking a dive in September, metro Denver’s housing market stabilized at a lower altitude in October, according to the Denver Metro Association of Realtors. Agents report more sellers are dropping their asking price, more buyers are backing out of contracts and listings are taking longer to sell. New listings took 29 days to sell last month, up from a fast 19 days measured in June.”

    Sounds like the market is crashing than “stabilized” …the days to sell probably dont include sellers taking overpriced shacks off and on.

    1. “But home price gains are slowing in metro Denver and median prices remain below the peaks hit last spring.”

      Gains are slowing sounds like sanity is returning.

      It’s not a crash when prices are still gaining but when a peak is reached, it remains to be seen on what happens next.

      1) It could flatten like the stock market for years like in the 90s.
      or
      2) If a Black Swan flies in, who knows what could happen. Hopefully not like 2008.

      1. not like 2008.

        House prices did not return to sustainable levels in 2008. Hopefully this time will be different.

      2. That’s why its crashing….in a few months YOY will be negative and that’s when the fun really starts.

        1. Why house prices in global cities are falling
          The Economist-6 hours ago
          House prices in big global cities increasingly move together. … has a growing influence on what happens in New York, Toronto and Sydney—and vice versa.

      3. In January, we start lapping the major increase in conventional loan limits. If Freddie and Fannie don’t increase conventional loan limits again, you will see big price declines since we will now comparing apples-to-apples loans.

        Similar thing happened after July, when we started lapping the insane 50% DTI.

    2. “more buyers are backing out of contracts and listings are taking longer to sell.“

      Seems to be a common trend, many homes that I have tracked have gone into pending and popped back up weeks later as if it is a new listing. When they do mention anything about a previous sale falling through, they have made note that the withdrawn FB couldn’t make the financing obligation. In reality they likely figured out what that they were about severely overpay and regret it for the next 30 years or until the bank pulled the carpet out from under them. Most these home prices as of recent have also been reduced when they came back online. Guess the next knife catcher will be getting a bargain!

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