Denver Evolution: Market Review | July 2024

Is the Economy Sufficiently Shambled?

I long for the day that I no longer set calendar alerts for “Release of CPI Report” and “Jobs Numbers” each month, but that day is not today!!

As your local economic correspondent (self-appointed), I take my job very seriously. Whether it’s the CPI, jobs report, FED comments, what have you…I’m right there, on the front lines, ready to bring you the hard-hitting facts!

The news never sleeps, people!

Well, I’m happy to report that with today’s release (July 10^th) of the CPI report it appears as though the tides are changing in the war on inflation.

In case you’re not down with the lingo, CPI stands for Consumer Price Index, which tells us how much value this month’s dollar has lost compared to last month’s dollar (aka inflation).

July’s report was welcomed with open arms coming in at 0.065% instead of the expected 0.2%!! Earth. Shattering.

With inflation still hovering around 3% year-over-year, this helps get us a teensy bit closer to the 2% inflation rate targeted by the Fed.

Over the last few years, the CPI report has gained notoriety as one of the leading sources behind large swings in mortgage rates.

That held true again, with rates dropping from about 7% to 6.85% - and likely would’ve gone further but the market pumped the brakes a bit to allow for a slower, more sustainable pace.

Combined with a bunch of other factors that I won’t bore you with now – data is starting to pile up that could convince the Fed to holster their weapons and consider the economy sufficiently shambled.

We’ll see if it holds in the coming months!

Boots on the Ground

To quote the great Snoop D.O. double G… “there’s so much drama in the LBC”…in this instance, the LBC is real estate. I’ve been waiting to write about this until the courts finalize everything, but the gears of justice move too damn slow – so let’s dive on in. Several years ago, a number of class action lawsuits were filed against the National Association of Realtors (NAR) along with several brokerage firms, including RE/MAX.

The lawsuits covered many issues, but essentially boiled down to NAR’s cooperative compensation rule – which required agents listing a home in the MLS to offer a co-op fee to an agent who brings them a buyer.

There was never a set amount tied to realtor commissions or co-op fees – but – if commissions are always negotiable, they should theoretically be negotiable down to zero. This rule made that impossible.

For a little history, the co-op rule was adopted in 1990 due to demands from consumer advocacy groups for buyer representation.

Co-op fees did exist prior, but they were inconsistent, and buyers without representation frequently fell victim to unfair treatment.

Over time, agents either didn’t understand or didn’t explain the concept behind commission sharing, and some sellers felt they hadn’t been given a choice in the matter.

While not finalized, the settlements will bring fairly significant changes to the industry.

Firstly, co-op fees will not be required but remain optional. Further, these fees can no longer be advertised in the MLS – but sellers and their agents may advertise them in other ways. Also, when working with buyers, agents will be required to obtain a signed agreement prior to showing any homes.

The downstream effects from these changes are hard to predict. Like anything else, my focus will be on finding creative strategies to provide the best possible outcomes for my clients based on their specific needs and current market conditions.

Innovate to elevate!

Peaks and Valleys

 

See that little tick upwards at the end of the chart? That’s the market catching its second wind – this tends to happen around August after the peak of the spring market cools off so it’s a little early. We’ll see if it keeps going!

A couple months back, I talked about the steep and deep valleys that started about this time in 2022 and 2023. Each of the sharp drops you see in those years were the result of rapidly increasing mortgage rates. From 4% to 7.5% in 2022 and 6% to 8% in 2023.

To me, this solidifies the fact that, even with rising inventory and more days on market – home values will hold firm with “modest” (aka normal) growth at 3% - 6% year-over-year….as long as mortgage rates don’t go haywire on us again.

Market Insights - June Data

 

While the increase in inventory hasn’t put a damper on home values overall, that doesn’t mean we won’t see at least some effect from this later in the year. For now, the homes that are closing are the ones that are most sought after.

There are plenty of homes active on the market that have yet to close – or even go under contract – due to a number of factors. The main one being mispriced homes, with sellers and/or agents chasing prices that were never there to begin with.

Regardless, any “valley” we see in home values this year will be the normal, seasonal, kind of valley caused by a glut of homes finally closing after being priced way over-market before finally selling way under-market after several price reductions.

Remember, the seasonal home price declines we see at the end of the year aren’t your home losing value. It’s just the product of listings that have languished on the market for several months all closing around the same time and showing in the data.