Experts: ‘Strange time’ for real estate, and no time for fence sitting
The Colorado Springs housing market has cooled, but it’s far from cold.
While the inventory of homes on the market is up a dramatic 259 percent over March of 2022, it’s still historically very low. The higher inventory is credited to a surge in interest rates from the low 3-percent range in December of 2021 to more than 7 percent in the fall of 2022 that sidelined many would-be homebuyers.
“That adds $1,000 to $1,200 to the monthly payment,” says Justin Harward, a Senior Mortgage Broker with Low Cost Mortgage.
Interest rates have been “gyrating up and down, but staying mostly in the low to mid-6-percent range the last six months,” Harward says.
As rates have leveled off and become more predictable, real estate sales activity has picked up with total sales climbing to more than 1,000 in March for the first time since October, according to data published by Empire Title.
“The interest rate hikes have calmed down,” says Chris Lutyen, managing broker of Coldwell Banker Realty. “And buyers are coming back into the market.”
But there are fewer new listings now than there were during the super-heated pandemic days. Inventory is up only because homes are not selling as fast as they did in 2020 and 2021.
Higher inventory is still low enough inventory for experts to call Colorado Springs a Seller’s Market. There is still less than a two-month supply of houses at most price points, based on the amount of time it would take to sell everything on the market at the current pace of sales.
“Traditional wisdom is that a balanced market is around five or six months of inventory,” says Scott Sufak, a broker associate with ReMax Real Estate Group and the president of the Pikes Peak Association of Realtors. “I tend to think that’s closer to four months.”
Where inventory had been under a one-month supply in 2020 and 2021, the balance is beginning to shift slightly more favorably toward buyers, but it’s still holding pretty strong in favor of sellers.
“We’re still seeing multiple offers on properties that are priced well, especially at the lower price points,” Sufak says.
Multiple offers today looks different from how it looked a year ago, Sufak says. Sellers are getting two or three offers, not 15. And sales prices are still close to the listing price.
“Some buyers are even able to get concessions again,” he says.
That has created a more hospitable environment for first-time homebuyers, who don’t typically have as much money to put down and who likely couldn’t have afforded to pay tens of thousands extra to bridge the gap between a low appraised value and the contract price.
“At the same time, if properties are slightly higher in price or are not priced as aggressively, we’re seeing them sit on the market longer — sometimes 30 days or more,” Sufak says.
The average days on market was 48 in March, according to statistics compiled by Empire Title. That’s up from just 13 days in February of 2022.
The median home price has also slipped downward as the average days on market has climbed. The median sales price fell 2.9 percent year over year to $460,000 in March.
But that statistic could be misleading, Lutyen said. He’s found prices to be surprisingly sticky and contends that they have probably even climbed over the last year in certain segments of the market. At the finish of 2022 in December, the median home price was up 8.5 percent year over year. So, slight declines in 2023 will still have prices well over 2021 sales.
“We saw a huge inflation in prices in 2021 and early 2022,” Lutyen says. “We had so few listings then that people were overbidding and creating a huge price bump, inflating the prices more than they would have been otherwise. A sort of downtick in pricing now is like a recovery.”
Looking forward, Lutyen said he expects to see inventory numbers swell in the summer months, as they typically have in past years. But it’s hard to predict how interest rates will influence home buying activity for the remainder of the year.
National Association of Realtors predicts rates will stay steady in the 6 percent range. The National Mortgage Bankers Association predicts rates will fall to the low 5 percent range. And others point to the debt ceiling debate in Congress that could create significant financial volatility.
If rates were to get below 6 percent, housing market activity would likely ramp up so long as it’s not accompanied by a major recession and layoffs.
“When rates get closer to 6 percent, we start seeing more contracts come in,” Harward says. “That seems to be a rate where homebuyers are comfortable.”
Rates could surge with the debt ceiling volatility over the summer and come down rapidly in response to that volatility.
“There’s no way to predict,” Harward says. “This is a strange time where the opposite of what we expect could totally happen.”
“I think the takeaway,” Lutyen says, “is don’t be on the fence. Don’t decide whether to buy or sell based on what you think the market is going to do or not do, especially if it’s your primary residence. Buy or sell when it’s right for you.”