Where do we start? Real estate this year has already been a roller coaster ride and we are only two months into 2023. All signs point to the rest of the year continuing to be a wild ride. Hold on to your hats as we explore the current dynamics and the future of Colorado Springs real estate.
Home Prices in Colorado Springs
The average sales price in Colorado Springs for February 2023 was $500,483. The big takeaway from this month’s statistics is that the year over year average home price decreased by 2.77%. We’ve been anticipating the year over year average sales prices to decrease and we expect them to continue to go down until at least this summer. Why? For the first half of 2023, we will be comparing market statistics to the first half of 2022 when the Colorado Springs real estate market was at the height of the market frenzy. Extremely low inventory, predicted interest rate increases and high buyer demand contributed to most listings snagging multiple offers and contract prices well over list prices.
January 2023 had some high priced outliers that caused an unexpected spike for average sales price to about $525,000. The median price has been much more stable and has hovered between $440,000-$445,000 for the last 3 months.
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Colorado Springs Overall Sales
It was a nice surprise to see a lot of activity in January resulting in a high number of units sold compared to same time period last year. This was caused by a small window of interest rates swinging below 6% that motivated many buyers to jump off the fence and into the buying process.
Number of Homes for Sale in Colorado Springs
The amount of homes for sale has significantly increased compared to last year. Year over year, the inventory has increased nearly 300%, but our month over month inventory has declined since September of 2022. If we have another drop in interest rates, expect to see multiple offers again on the few homes that are on the market.
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Tips for Sellers Navigating the Current Market
Days on Market
On average it will take 54 days on market to sell your home in Colorado Springs. We expect this number to increase even though we are approaching the military moving season. There is a high likelihood that many potential buyers moving to Colorado Springs will opt to rent one of the less expensive rental homes instead of buying.
We all know that affordability in housing has all but disappeared. The proof: the median mortgage payment increased $437 from January 2022 to January 2023 . That is an incredible difference of 28%. Every 1% of mortgage rate increase will decrease a buyers purchasing power by 10%.
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High interest rates and limited inventory will make this spring an awkward selling season. We’ll continue to see pent up buyer demand coupled with additional buyers from the upcoming moving season. Some speculate that this February bump was an early start to the spring selling season we typically see here in Colorado Springs.
It’s a bumpy ride for anyone in the real estate market: agents, home sellers, home buyers, homeowners. Everyone is trying to make sense of what’s happening.
Yesterday’s shocking news was that the 30 year fixed mortgage came in at 7.16%. We think “Ouch!” when we read that, but there is a chance in the near future that we will look back at 7.14% with wishful thinking.
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Is a real estate crash imminent?
The short answer: no. We still don’t see a crash on the horizon. Will there be more distressed properties? Yes. We might start to see more cash out refinances that cannot be repaid or cases where homeowners simply got in over their heads when they purchased a home in the past 12 months or so.
There were many reasons the housing market crashed 14 years ago. It forced homeowners to sell their underwater homes and create a huge amount of inventory. In June/July of 2007, Colorado Springs had just over 7000 listings on the market with only 1100 sales in those months. The impact was traumatizing for many. Compare that to February 2023: 1443 listings and 1516 sales. And Colorado Springs was was much smaller in 2007.
The greatest differentiator between 2023 and 2007 is the number of active listings. Mortgage lending regulations are much tighter now and most homeowners are unlikely to be underwater on their loan with their equity growth over the last few years.
Sliding Rent Prices
As more homeowners decide rent out their homes instead of selling, we are also seeing a large number of rental complexes being built. We have long needed a increase in the supply of rental homes, but this will also cause rental rates to decrease for the first time in years as the rental options expand.
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Interest rate hikes are the main tool utilized by the Federal Reserve to influence the economy and hopefully reduce inflation. Of course, the hope is that people slow their spending when interest rates increase. The United States has been teetering on a recession for awhile with many expects predicting that we will officially slide into one in 2023. High interest rates have slowed down the economy to the point where it has stalled and potentially needs to be revived by decreasing interest rates.
Fannie Mae believes that the bump in sales activity in February is short lived. The market has already reacted to the expected 50 point rate increase by the Federal Reserve Board at the end of March. Keep an eye on the upcoming Consumer Price Index (CPI) and unemployment rate release for February. If these metrics show that inflation is not cooling as quickly as the Federal Reserve Board would like, expect more interest rate increases.
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Keep in mind that real estate is local. National news provides a great 10,000 foot overview of what’s happening across the country, but it is NOT representative of the Colorado Springs market.
It’s also important to remember that any current real estate sales numbers reflect what was happening 4-8 weeks ago since it usually takes a minimum of 30 days to close a real estate deal. If you are looking for current data, take a look at Altos Research Data. Altos allows to you to research your zip code, view 7 to 90 day moving averages of home values, listing prices absorptions and much more. Email us (email@example.com) with your zip code and we’ll send you a full report from Altos.
Other indicators of the current buyer and seller trends are the number of mortgage applications and the amount of showings. Your real estate agent can provide these data points along with what they are seeing in the market when working with clients. Reach out to us if you’d like this info for your neighborhood.
Tips for Home Buyers & Home Sellers
- Stay alert and keep your eye on the market. Take advantage of small windows of opportunity when interest rates drop or a dream home comes on the market.
- Save your money, pay off debt, and spend conservatively to get you through the next 12 months and into homeownership.
- Download the Home Buyer Guide
- If you are thinking of selling your home in 2023, consider doing it sooner than later. Definitely before July 2023 when our real estate selling season will slow down.
- Diligently prepare your home and price conservatively to gain the interest of the buyers out there.
- Get a home equity line of credit (HELOC) in place for a future purchase or an emergency. You might not be eligible for a HELOC after you list your home or if you encounter a hardship. Don’t spend your home equity line of credit until you really need it. It can get expensive quickly since the interest rate of a HELOC is adjustable.
- Keep a close watch on the market to take advantage of small windows of opportunity when interest rates drop and buyers come out to shop.
- Download the Home Selling Guide
Remember, we are always here to answer questions. At Colorado Real Estate Group we don’t just sell houses, we take care of people. Give us a call 719-219-9739 or email firstname.lastname@example.org.