Colorado Springs-area housing market: Reversal of fortune continues

A Colorado Springs-area housing slowdown, which began in the second half of last year after mortgage rates spiked, showed no signs of improvement last month, two industry reports indicate.

Sales of single-family homes totaled 1,119 in July, a 20.2% falloff from the same month last year, according to the Pikes Peak Association of Realtors’ latest market trends report.

Home sales now have declined for 14 straight months on a year-over-year basis, dating back to June 2022.

The median price of homes that sold last month, meanwhile, fell to $472,000 or 2.2% lower than in July 2022, the report shows.

Median prices have declined for six straight months on a year-over-year basis — a reversal of fortune for sellers who saw prices grow each month, often by double-digit percentage gains, over an eight-year stretch that began in late 2014.

The supply of homes for sale at the end of July totaled 2,254, down 11.6% from the same month last year. The reduced supply gives potential buyers fewer choices; the inventory of homes for sale in July, when kids are out of school and many families look to purchase, regularly topped 3,000 and 4,000, according to Gazette historical data.

The pace of new home construction also was sluggish in July.

The Pikes Peak Regional Building Department issued 94 permits for the construction of single-family, detached homes in July in the Colorado Springs area, a nearly 49% drop from the same month last year.

July’s total also fell 81.2% from the 500 permits issued in June. That month’s total, however, was inflated because builders rushed to pull a flurry of home construction permits in advance of a new building code that took effect June 30.

On the multifamily side of the market, no building permits were issued in July for the construction of apartment projects. That’s unusual because a strong demand for apartment living over the last few years has led to a booming market for the construction of multifamily projects.

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In general, local real estate industry members have pointed to higher borrowing costs for the market cooldown.

The Springs-area housing market, like many cities nationwide, saw surging sales and prices over the last several years.

Thirty-year, fixed-rate mortgages that hovered around historically low levels of 3% fueled a strong demand for housing.

That demand and a shortage of homes helped propel prices to record levels, including a Colorado Springs-area median high of $495,000 in June 2022.

Sellers, meanwhile, often fielded multiple offers and bids that topped their asking prices by several thousand dollars.

But when the Federal Reserve began raising interest rates last year to dampen inflation, mortgage rates followed.

They rose steadily in the second half of 2022 and roughly doubled by year’s end, which priced many buyers out of the market and led to the slowdown in sales, prices and construction.

Last week, 30-year, fixed rate mortgages averaged 6.81% nationwide, according to mortgage buyer Freddie Mac. At the start of 2022, they averaged 3.22%.

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