It’s always exciting to see the monthly data for average and median sales prices here in the Colorado Springs real estate market. At this point, the sales data is very much driven by mortgage interest rates. Let’s dive into the numbers and market influences.
Inflation & Interest Rates’ Influence on Real Estate
This time last year saw sinking consumer confidence as the inflation rate was rising and the Federal Reserve Board continued to increase interest rates month after month. Fast forward to 2023, and we have higher consumer confidence compared to last year, and home prices have moderately increased despite predictions that they would drop.
The Consumer Price Index (CPI) for September climbed for the second month in a row. This is certainly not what anyone wanted to hear. Keep in mind that housing costs are a large influence on CPI, so rising housing costs mean the CPI is more likely to increase as well.
The Federal Reserve Board has recently been content with inflation rates in the 3’s. It was expected they would not issue a rate increase at their next meeting on September 20. But the September CPI release casts some doubt onto that prediction. Market experts are nervously looking toward that next Fed meeting while also wondering if we will have a government shutdown at the end of the month.
In recent CPI’s, the cost of shelter was up to 90% of the inflation rate. An increase in interest rates could actually be counterproductive as this would pressure the housing costs even more, stall the real estate market, and possibly fumble the soft landing the Feds have been aiming for. Addressing the rising housing costs would seem the fastest and most effective way to curb inflation.
Related Reading: Steps to Buy a House
Colorado Springs Real Estate Data August 2023
The average sales price for the Pikes Peak region in August was $553,959. Let’s break down the data for just El Paso County.
El Paso County Data:
- 848 single family and patio homes sold (798 were existing homes)
- $550,305 average sales price for existing homes
- $475,000 median sales price for existing homes
- 23 average days on market for existing homes
Inventory & Sales:
The number of homes for sale has steadily increased over the last year, but we are still just a little below 2022’s peak. We continue to struggle with having enough inventory in the Colorado Springs area, and sales have slowed down with about 500 fewer home sales than August 2022. This is an indication that buyer demand has fizzled. The buyers that are out shopping are much more selective with their purchases.
Some have started calling this real estate market a frozen market. Sellers don’t sell because they don’t want to give up their low interest rate or can’t afford the higher rates. Buyers don’t want to buy with high sales prices and interest rates, or simply can’t afford it anymore.
Home Prices Remain Strong:
You would think that home prices would drop quickly with less buyer demand, but we’ve had little to no decline this year. We may see a small dip in home prices in the next couple of months during our seasonal real estate slow down but that is to be expected.
What’s next for buyers and sellers in Colorado Springs?
Over the past few years, Atlas Van Line’s migration patterns have shown Colorado as a net zero state. This means we have had an equal number of residents arriving as there are leaving. But it has not felt that way in Colorado Springs. In fact, Colorado Springs is expected to grow with many new employment opportunities moving into the area. BoeCore just announced 600 new employees will move in, while hundreds of new positions will be created for solar panel company Meyer Burger. There will be a new growth velocity created in the local Colorado Springs economy that will push demand and prices higher even with the higher interest rates.
The projected growth is an encouraging outlook for future sellers in the next 12 to 24 months. But current sellers will need to be patient with today’s market dynamics. It takes an average of 14 showings to generate a contract, and we are seeing an average of 1.5 showings per week right now in Colorado Springs. Sellers can expect to sit on the market for an average of 9.3 weeks.
- Price Your Home to Sell
- Steps to Sell a House
- Tips for Sellers Navigating a Shifting Market
- Download the Home Selling Guide
Buyers should take a close look at their payment numbers. There are great opportunities to take advantage of right now if they play around with payment numbers and smart offers. Buyers will find much less competition which gives them more negotiation power. Current conditions mean that they can offer less than list price, and ask sellers to contribute to closing costs or to help buy down their interest rate.
Lower Interest Rates for 2024?
While we are still hovering at interest rates above 7%, Fannie Mae is hopeful for an encouraging 6.7% and the Mortgage Banker Association is predicting an even happier 6.2% at the end of 2023. We will see a lot of buyers jumping back into the market and creating a new wave of competition if interest rates do indeed come down to 6.2%.
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