It doesn’t take much to create over-supply in this market!
After years of significant appreciation mainly due to low inventory, the exhaustion on the buyer’s side is real.
The market is trying to find its footings at today’s price level: there are a lot of motivated buyers but a good chunk of them can’t qualify to purchase the house they want. The alternative is renting, which is incredibly expensive as well. There is no end in sight to the high cost of shelter… In these tightening conditions, can the lack of supply drive this market to even higher grounds? Is this dynamic starting to show any signs of weakening? The answers are yes and yes. The lack of supply can drive this market for longer. But as it keeps going, some (temporary) cracks begin to appear and you can take advantage of them as a buyer, or stay away from them when you sell.
There is a reason why people want to live in the Roaring Fork Valley!
Follow the inventory
If the inventory has to be the main driver of this market, keep a close eye on it! You’ve heard the story many times, in our area the months of supplies hovers around 1 to 2 months, 6 months being historically considered a balanced market. It remains a reality, but the trend is slowly exhausting itself.
What to look for
It takes less and less inventory to keep prices on the rise or even maintain them where they are. At today’s price, 3 to 5 homes for sale in the same neighborhood might be all it takes to create a situation of over-supply and transfer some of the leverage from seller to buyer. It only takes a few neighbors in a given area to list their house at the same time and the inventory in that specific neighborhood quickly becomes too much to sustain the current level of pricing.
Very temporary market conditions
The level of demand is so high in our area that this resolves fairly quickly. Once the extra 2 or 3 listings get scooped up, prices stabilize again. But it opens a window to come in for a ready and informed buyer.
A real life example
A few months ago I had observed that such pocket of over-supply was building up in Castle valley Ranch in New Castle. When my client called to let me know that he was ready to invest in a property, I drove him down to that area and found a great home that was move-in ready, with an extra large lot. It had sat on the market due to about 10 other listings competing with it there. The sellers were pressing to get an offer. They offered $597k ($53k under the original list price) and the home appraised for $650k. At $150k down, that’s a 33% return on day one! Fast forward to now, just a few months later, most of that inventory has sold and it’ll be hard to negotiate prices there from now on.
This is how to get a decent deal as a buyer right now:
Identify your preferred areas.
Line up your financing and make sure you are ready to pull the trigger (AKA don’t loose patience and buy a brand new truck on credit :) ).
Keep a close eyes on the level of inventory in these areas. Understand what is a level of inventory that this market can bear, and what would be too much.
If and when inventory builds up in an area, wait for another month or two and start writing offers to test the sellers’ motivation. Find the one who will be willing to give you a discount to get a deal done!
As a seller, wait if you can when a lot of homes are listed in your area!
Right now in our valley
Here is a quick reading on the different neighborhoods in our valley, and where their inventory stands. Contact me for specifics!
Over Supply/prices softening:
Lakota Ranch (New Castle): 8 active listings above $1.1m
Pinyon Mesa (Glenwood): 6 listings above $1.2m
Glenwood Springs 2 bedroom condos: 13 listings
Ironbridge (Glenwood) above $1.3m
Springridge reserve spec homes: 5 listings
Balance/prices should remain stable or rise slowly:
Castle Valley Ranch (New Castle): Was in oversupply the last few month, that ship has sailed.
Townhomes in Carbondale/Glenwood/New Castle
Inventory crunch/ Price will be on the rise:
Move in ready Single Family homes within city limits of Glenwood Springs, Carbondale, Basalt across the board.
High end new construction in the mid-valley.
Feel free to reach out if you have specific questions about an area. It takes somebody with boots on the ground to see these little pockets of over supply come up and I’m happy to be that guy if you need one!
