Our Market Isn’t Imploding: 2008 vs. 2024

Sigh…oh, 2024 – another year that has kept us on our toes. After two years of growing rates, the anticipation for interest rates dropping has been intense. As the Federal Reserve’s tactics to slow down the economy have been working, the journey is going at tortoise speed. In the last couple of months, we saw rates steadily dip to a low of 6.2% for the 30-year fixed, and the Fed made a historic 0.5 cut to the Fed Rate for the first time in a decade. But with the job market’s surprising resurgence, rates bounced back up, a typical (yet altogether unwelcomed) symptom of an economy still in rebalance.

Between rates, election stress, and many other unpredictable events this year, many buyers and sellers need clarification about our market’s health. In fact, 64% of homebuyers said they’re waiting until rates drop between 4-5.9% before purchasing (source: Real Financial Progress Index from BMO Financial Group). Our market has softened to a level we haven’t experienced in many years.

So, is the Front Range market at risk of imploding? More inventory and much slower transactions – how similar is 2024 to 2008? It’s time for our annual re-examination. When we compare today’s factors to the historic housing crash, it’s clear we are far from repeating the past.

Read: Wait for Rates To Drop Or Seize The Opportunity?

2008 HOUSING MARKET CRASH

In the lead-up to 2008, obtaining home loans was relatively easy. Individuals without substantial financial resources could qualify for certain products, albeit with riskier conditions. However, as the recession took hold in 2007, many homeowners faced unemployment (reaching a 6.1% rate) and saw their savings dwindle. Many of them faced the risk of foreclosure. As desperate homeowners flooded an already robust buyer’s market in Colorado, our markets were overwhelmed with an inventory of homes. Denver alone reached a peak of 36,000 listings per month (population: 2.3 million).

With buyer demand being non-existent, by the end of 2008, our home values depreciated by 13% and led to approximately 40,000 foreclosures that year.

2024 HOUSING MARKET STRENGTHS

Over the last 15 years, the mortgage loan industry has transformed to protect us as much as possible from another 2008. To qualify for a home loan now is a far more rigorous process, and mortgage products include safeguards to minimize buyers’ chances of foreclosure.

By 2024, the Front Range’s market is a whole different level. The momentum we’ve gained over the last 15 years established us as one of the strongest and most attractive in the nation. A clear example is comparing our communities’ inventory. Take Denver, for example. Finishing September with 10,000+ active listings may seem alarming. But the population is now at 2.9 million. It may be a softer market, but that built-in buyer demand remains.

Also, we need to consider the average Months of Inventory (MOI). A balanced market (meaning the playing field is level between buyers and sellers) is six months of inventory. Denver is only at 3.7 months – making it a soft seller’s market. To even tip the market solidly in buyers’ favor, the surrounding seven counties would basically need to double the number of listings to 20,000+. When you consider how much economic stress it has taken the market to reach half that, the chances any part of the Front Range will ever be a strong buyers’ market is meager.

Read: Is This a Buyer’s Market? Understanding Months of Inventory

This year, the biggest challenge for our real estate activity has been affordability. And that’s not just attributed to higher rates.

Our home values have remained stable! Colorado’s median home sale price as of September was $592,900 (growing 1.7% year-over-year).

Any depreciation our Front Range communities experienced in the last year was under 5%, and almost all of them have seen an increase this year, meaning our home values have been through the dip and are on their way upward, especially as interest rates continue to drop in the months or year to come.

Front Range real estate remains secure and stable and still offers wealth-building opportunities. Of course, the trends can vary when you are looking at buying, selling, or investing in specific communities and even neighborhoods. That’s why it is crucial to request hyperlocal data from your trusted RE/MAX Alliance agent. While others are sitting on the sideline, this may be an opportune moment for you to make a move. We at RE/MAX Alliance are committed to prioritizing your goals, understanding your needs and timing, and strategizing to provide you and your family with an exceptional quality of life through real estate.

Sources: Megan Aller, First American Title, Colorado Association of Realtors, Denver Metro Association of Realtors, Sofi.com, Attomdata.com, Colorado Division of Housing, Bureau of Labor Statistics