Recap of Real Estate Dynamics in Colorado Springs
2022
Colorado Springs’ real estate market had a significant shift in June and July of last year. Buyers reached their pain threshold with home prices remaining high as interest rates increased, causing many to pause their home buying journey. New homes for sale were suddenly sitting for weeks and that caused inventory and average days on market to increase. Navigating this shift was awkward for both buyers and sellers since it was unclear where the market was headed. The few buyers that stayed out shopping were able to snag a great deal with very little competition.
2023
While many predicted sharp home price drops and a sluggish market for 2023, the first few months of this year brought surprises for Colorado Springs real estate. Suddenly, multiple offers were popping up again, especially when interest rates had even a minor dip and buyers jumped back into the fray.
Our busy spring real estate season had a bit of a slow start as everyone adjusted to the new normal of higher interest rates. But buyers entered the market again just as we saw a decline in the number of homes for sale. Having enough inventory to meet buyer demand has been a persistent challenge for the last few years.
June 2023 Consumer Price Index
The Consumer Price Index (CPI) for June was published with a surprising 3% inflation rate drop compared to June 2022. Core CPI, which is the CPI without the most volatile costs like fuel and food, dropped to 4.8% from 5.3% in May. This indicator is much more stubborn in changes, so the 0.5% drop is considered impressive.
Current Colorado Springs Real Estate Stats
While many predicted that home inventory would significantly increase in 2023 and cause prices to crash, that didn’t turn into reality. Golden handcuffs are commonplace in today’s real estate market: homeowners with a low interest rate who would like to move are locked into their current home and low interest rate because moving to a new home would mean a higher mortgage payment. This dynamic contributes to ongoing low inventory.
Average Price: The average home price ($555,403) in Colorado Springs increased $20,000 from May 2023 to June 2023. The median home price increased $10,000 from May to $485,000, but year over year it is down by $10,000.
Overall Sales: Home sale activity saw a slight increase, but compared to last year there are nearly 25% fewer homes sales. June is the 13th month in a row of sales decreases as we move toward the end of the year and a seasonal decrease in activity. Buyers are still out there shopping, but they have fewer homes to choose from. Despite the high interest rates, most buyers are all in once they find the house they want.
Average Days on Market: Days on market dropped to 23 days. We are still in a hot market where buyers find themselves again in a situation where there are not enough homes for sale. If the search is limited to El Paso County and just existing homes, then the days on market shows a very low 18 days.
Amount of Inventory: Overall, the number of homes for sale increased month over month to 2059. This number is increasing but it is still just a 6 week supply of inventory. This means all homes would be sold in 6 weeks if sales activity remained steady and no other homes came up for sale. Just a reminder: a 3–6 month inventory is considered a healthy and balanced market.
Related Reading:
10 Ways to Lower Your Mortgage Payment
Tips to Boost Your Home Buying Skills
New Construction in Colorado Springs
Residential Building permits are at a 15 month high as buyers turn to new construction. This is a good option to get a home to that they love with no competition and to take advantage of enticing builder incentives. We recently had a builder offer our clients more than $30,000 in incentives to pay for an interest rate buy down to a rate of less than 4.5% for 30 years.
It’s important to note that new building code changes were implemented on July 1st, 2023. The spike in permits for June was influenced by the fact that many builders pulled new permits before this date to avoid changing requirements and increased permit fees.
Related Reading:
Where to Find New Construction in Colorado Springs
Tips for Choosing a Builder
Is Cash Still King?
When we are shopping for homes with buyers and they decide to offer on one that they fall in love with, we often caution that competing cash offers mean they might not get the contract. Thankfully for buyers, the frequency of cash offers has decreased by about 50%. We had 1209 home sales in June in El Paso County, and just 13% of those were cash sales. That’s down from 22% last year.
Home Buyers In June and July 2023
Again, buyers are still out there competing for homes despite the increase of monthly cost from interest rates, property taxes and homeowners insurance.
- Inflation
Inflation has calmed down and drastically dropped from last year’s shocking 9.1%. While we are not fully out of the woods, we are on the right track with recent trends. - Interest Rates
Home buyers are already maxed out on home affordability and their quest comes to a quick halt with even the smallest interest rate increases. Interest rates have continued to hover around 7% with temporary dips into the high 6’s. Hopefully, the good CPI numbers and the soaring stock market will help reduce the rates. - Property Taxes
Property tax statements for the 2023 tax year went out in May. We have spoken with many homeowners who can’t believe how much their taxes have increased and many have filed appeals in an attempt to reduce their tax burden. People purchasing a home this year will need to be prepared for their monthly mortgage payment to increase next year when those increased taxes are being paid. Good lenders will try to build this into the loan qualification in 2023. - Homeowner Insurance
We’ve seen excessive rain and hail causing damage around Colorado Springs this year. The natural disasters of the past 10 years have nearly doubled homeowner insurance premiums. It pays to shop around to find the best coverage with the lowest premium. - Student Loan Repayments
Student loan repayments are resuming again this year after being paused during the pandemic to provide financial relief. However, resumption coincides with the halt of student loan forgiveness. This can put homebuyers into a non-qualification for loans and send them back to square one for their home purchase. - Inventory
We feel like a broken record by now, but Colorado Springs’ struggles with inventory have remained constant for the last 5 years. There are simply not enough homes for sale, and this is keeping prices high and affordability at a historic low.
Related Reading:
Steps to Buy a Home
How to Appeal Your Property Taxes
Home Sellers in June and July 2023
It’s difficult to predict exactly how long it will take for a home to sell in the current market conditions. Homes that are strategically priced and diligently prepared can sell in a weekend—especially if the interest rates happen to dip a bit when you go on the market.
The number of showings in the first week can usually be a good indicator of how fast you may get an offer. But even that number isn’t always reliable in this market of shifting dynamics. It’s tempting to refuse backup offers or offers with contingencies, but a buyer can terminate a contract at any time even without a contingency. It’s important to keep an open mind for all offers, even if they aren’t exactly what you were hoping for.
Two Scenarios We’ve Seen in the Colorado Springs Market:
- Recently, our buyer’s contingent offer was rejected by a seller whose home had just been listed. While we understand the seller’s motivation to not accept an offer that could possibly fall through, they could have countered with contract terms to ensure a smooth transaction. Our buyer ended up going under contract a week later with the same contingent offer because the seller had not received any other offers.
- On a different occasion, a seller declined to sign our backup offer that was essentially the same terms as the primary offer. The seller felt that the primary offer was a sure thing and a backup offer was unnecessary. It was disappointing for our buyers, but they eventually found another home they are very happy with and they closed last week. Meanwhile, the seller that refused to sign the backup offer is still on the market. Their primary offer fell through and now they are listed at $15,000 below our backup offer. This is not ideal at the end of the moving season with higher interest rates. Again, be open to offers, even if they aren’t exactly what you originally had in mind.
Related Reading:
Steps to Sell a House
Tips for Sellers Navigating a Shifting Market
Tips for Home Buyers and Sellers in the Current Market:
Home Buyers
- Shop around for a lender. Stay in touch with your selected lender once you start your search.
- Consider new construction: builder incentives might make up for the higher cost of a new build.
- Compare insurance companies: you could save some money on your monthly mortgage payment by finding the best coverage with the lowest premium.
- Be diligent with your finances. Save cash and keep debt down.
- Don’t hesitate when you find something you like. More competition will flood the market when interest rates decrease more significantly. This will make prices continue to increase.
Home Sellers
- Watch the market closely. We provide a 7-day running analysis for your zip code that allows you to see what is happening in real time in your neighborhood.
- Prepare your house diligently. Ask your trusted real estate professional to provide a list of recommended items.
- Price strategically. You’ll avoid sitting for a long time without activity and needing to drop the price.
- Buyers will flood the real estate market if interest rates decrease and Colorado Springs will not have enough homes on the market to meet demand. Be ready to quickly to take advantage of opportunities!
Questions? We’re here for you every step of the way. Give us a call 719-219-9739 or email susanna@co-regroup.com.
