Colorado’s hottest real estate market this year isn’t Denver or Colorado Springs or Fort Collins. It is Pueblo, which reflects a larger national trend that has buyers scrounging through the bargain bin to find homes they can afford.
“Homes have become radically less affordable. People are unhappy with housing,” said Glenn Kelman, CEO of Redfin, in a keynote speech before the National Association of Real Estate Editors in Austin on Friday.
Not that long ago, cities like San Jose, Seattle and San Francisco were enjoying some of the biggest price gains and strongest interest from buyers. Denver also used to be a regular on the list of hottest real estate markets put out by Realtor.com.
But San Jose home prices are now falling year-over-year and Seattle, San Francisco and Los Angeles are likely to join it, said Skylar Olsen, director of economic research with Zillow Group. Price gains are slowing in metro Denver, and a growing share of residents here are looking to relocate.
Rochester, N.Y.; Fort Wayne, Ind.; Lafayette, Ind.; and Boston were the nation’s hottest housing markets in May, according to Realtor.com. Pueblo ranked as the 10th hottest housing market nationally, up from 37th last year, with a 13 percent gain in people viewing real estate listings and a 5 percent jump in listing prices year-over-year.
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Redfin, a discount brokerage, closely tracks where people searching for homes on its website are looking and it is definitely seeing a shift away from the costliest markets to the most affordable.
Kelman even has a name for it — “The Wrath of Grapes,” a flip on “The Grapes of Wrath” novel of a family leaving Oklahoma for California during the Great Depression. He said he doesn’t know of a Silicon Valley company that isn’t looking to set up shop in the center of the country somewhere.
The United States has 45 million more people and 20 million more households than it did in 2000. But home sales are lower than they were two decades ago and there is a deficit of about 5 million to 6 million housing units, estimates Lawrence Yun, chief economist with the National Association of Realtors.
“Something is not right,” said Yun, who spoke on a midyear economic forecast panel at NAREE.
The big drop in 30-year mortgage rates, from around 5 percent late last year to 3.7 percent recently, has helped reverse a chill that had descended on the housing market, said Frank Nothaft, chief economist with CoreLogic.
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“That is a shot in the arm for the housing market,” he said.
But the fact that last year’s move higher in interest rates was enough to stall the market indicates a consumer who is stretched. If lower rates push up home prices again, as many economists forecast, it could only delay the eventual reckoning.
George Ratiu, senior economist at Realtor.com, highlighted some national numbers showing what the affordability gap looks like. The median price of homes listed for sale in the U.S. is $315,000. Buyers are viewing homes at a median price of $288,000 and buying at $277,700.
As to what the typical household can afford based on what they are earning — a median price of $245,000.
