The Front Range housing market is one, huge auction without precedent. A dozen offers over asking price—routine in historical hot periods. A dozen offers 20 percent above asking price? That’s new.
So everyone has the same questions: When does it stop? At what prices? And what’s causing it?
Clues. For-sale inventory of single-family homes has declined across the U.S. since the worst of the Great Recession, at least ten years. The foreclosure crisis stifled construction as early as 2004, and builders have not been able to make up the shortage. The inventory decline steepened everywhere in spring 2020, clearly a COVID result:more demand for detached homes, sellers too apprehensive to show a home or look for one, or to move at all.
Every metro area rich in IT jobs has housing leapfrog like ours. Each has become increasingly short of land for new subdivision. Only a few are still land-rich (Texas, Arizona), more resembling the Bay Area or Boulder-Louisville, with no land at all.
The IT metros are magnets for in-migration. They pay well, very well. Household incomes over $200,000 are common. These auctions are among the top 20 percent of well-off households, and have nothing to do with medians or “affordability.” The S&P 500 has risen by one-third since the start of COVID... has doubled in six years. Cash to fill the appraisal gap? Nuthin’ to it. Wealth effect? Oh, yeah.
When will it end? No way to know.
How will it end? Just like all hot markets. A sign will go in the ground, sellers prepped for auction, and... one discounted offer, another weakly contingent. Then another sign, priced a hair below the first. Crickets. As soon as buyers see more signs, they pull back, and we’ll enter the next long, flat spot with rusty signs and a few exuberant buyers underwater for a while.
