2022 is wrapping up with a lot of people scratching their heads when they think about the economy and real estate market. Inflation dipped in October, but the Federal Reserve still increased interest rates by 75 basis points. It’s important to mention here again that the Federal Reserve points increases do not mean an equivalent interest rate increase will occur. In fact, positive economic data points over the last few weeks have resulted in interest rates dipping into the 6’s. Who would have thought that people would get excited over interest rates in the 6 percent range?
Home Sales in the Pikes Peak Region
The amount of home sales in the Pikes Peak Region has steadily declined through 2022. Home sales peaked in June 2022 with 1712 sales, while November had 936. This is a 36% decrease from November 2021, but it’s not surprising with the drastic interest rate hikes compared to last year. This is what the Federal Reserve had in mind when they started raising the interest rates.
Related Reading: Steps to Buy a House
Homes available for Sale in Colorado Springs
The number of homes for sale in Colorado Springs has remained steady since June with about 2600 homes for sale. Unless homeowners absolutely have to sell, they are opting to wait and see what will happen in the market. Most home sellers (except for those who bought 12-18 months ago) will still walk away with money if they sell right now, even if it’s less they could have made if they sold in March 2022. This can be disappointing, but it’s important to stay in reality and pay attention to what is currently happening in our market.
Many headlines say that inventory is “exploding”, but Colorado Springs is still struggling with not having enough homes for sale. The buyers that are still out there house hunting are getting frustrated because they are not finding the quality of homes they are looking for.
Interestingly, more than 85% of homeowners have a mortgage interest rate of 5% or less for the next 30 years. This means that the rate hikes only have an effect on the new home buyers. Early Christmas consumer spending numbers in the United States indicate strong holiday spending. Homeowners with 5% or lower interest rate will have at least a little bit more spending money available.
While higher interest rates are a struggle for home buyers, be thankful that we are not like Great Britain where most of loans only have fixed rates for 2 – 5 years. Rate hikes there pack a greater punch to homeowners with variable rate mortgages that see monthly payment increases when rates rise.
Related Reading: Tips to Sell a House in a Shifting Market
Pending Home Sales
The number of homes under contract in the Pikes Peak Region compared to last year is approximately 40% less. The national average (see graph above) is 35.5% less YoY.
Home Sales Price
The average sales price in Colorado Springs is $525k which is about a $7000 decrease from last month. Keep in mind that the average seller contribution is $4681. This is the highest seller contributions have been since 2015. If you consider the average seller contribution, the average sales price is actually closer to $520k.
An interesting metric to pay attention to is the median sales price at about $453,000 for November 2022. The median sales price has decreased more sharply than the average sales price over the last several months. Obviously, the average sales price is being propped up by some strong price outliers with million dollar sales becoming more common in our area. But the median sales price strongly indicates that the majority of home sales have decreased.
Related Reading: Tips to Lower Your Mortgage Payment
2023 Real Estate Trends to Watch
1. People are moving to smaller cities
Home buyers are moving to less expensive markets to help their cost of living. Denver made the top 10 list of outflow cities with many Denverites heading to smaller metros. It remains to be seen how Colorado Springs fits into this trend because it is a top market but is also a smaller metro area with a pretty strong economy.
Related Reading: Colorado Springs Relocation Guide
2. Buying with Family and Friends
20% isn’t required for a down payment, but a bigger down payment helps keep monthly payments lower. This has influenced 18% of buyers to purchase a home with a friend or family member who isn’t a spouse. According to Redfin, Colorado Springs residents need a $121,000 annual income to afford a mortgage payment for a median priced home ($450,000). That is about 45% higher than in 2021 when it was about $83,000. Therefore, the trend of buying a home with someone other than a spouse is expected to continue in 2023 as affordability is still very low.
Related Reading: Tips for Choosing a Lender
3. Flat Home Values
Home values in 2023 are expected to be flat nationwide. The highest appreciating markets, including Colorado Springs, are expected to have a slight dip in home values.
The biggest gap in year over year average price decreases will be in the first 6 months of 2023. That’s when we will be comparing year over year prices to early 2022’s rocketing prices. April 2022 had the highest average sales price of the year at $561,000. This is unusual because June typically has the highest average price since it’s in the peak of moving season in Colorado Springs. We wouldn’t be surprised to see a decline of 5-6% in home values from April 2022 to April 2023. This should even out over the course of the full year. Keep in mind this is only an estimation since no one has a crystal ball.
4. Surge in Mom and Pop Landlords
With a bearish stock market, small investors are looking for alternative safe investments like real estate. Investors who already hold real estate with a very low interest rate from the previous 12-24 months are inclined to hold on to their homes. Rental rates have gone up so much that they can most likely comfortably cover their mortgage.
5. New Construction
New construction is like a big train that’s difficult to stop abruptly. Even though buyers have pulled back, builders are still building and finishing off permits that were pulled earlier this year during the boom. Builders will incentivize new construction buyers with special pricing and upgrades.
Related Reading: Where to Find New Construction in Colorado Springs
Economy Data Releases to Watch
- Monthly: Consumer Price Index (CPI)- the inflation rate is published on a monthly basis around the 10th. Next date: 12/13/2022
- Monthly: Unemployment rate. Economists are keeping a close eye on this particular metric. The hope is that this number increases as the economy slows down and inflation rates decrease. The current goal is a %5 unemployment rate. Next date: 1/6/2023
- Every 2 months: The Federal Reserve Board meets and determines if any interest price hikes are necessary. Next date: 12/14/2022
- Every quarter: The Gross Domestic Product (GDP) is reviewed quarterly, but there are also monthly data releases of specific parts of the GDP of the previous quarter. Any corrections of the previous monthly estimate are also announced. Last Q3 release 12/22/2022
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Current Colorado Springs Market Snapshots by Zip Code
Please click the headline to go to the detailed Home Report for your zip code. Don’t see your zip code? Comment on this blogpost or contact us and we’ll get it to you. A zip code is considered a Buyers Market if the Market Action Index is below 30. None of the zip codes in Colorado Springs have entered officially into the buyers market terrain, but 80924 and 80923 are holding steady right at 30.
(Cordera and Wolf Ranch)
(Flying Horse, Northgate, Gleneagle)
(West of Interstate 25, south of United States Airforce Academy)
(North Central Colorado Springs)
(East Central Colorado Springs)
(Peyton & Falcon)
(East Colorado Springs off of Highway 24)