Is it just us or did the first half of 2022 just fly by? It’s a great time to review what has happened in the real estate market and economy over the last 6 months and discuss what to expect for the rest of the year.
Colorado Springs Real Estate Market Recap
What happened January-June?
- Everyone hoped that the economy would start to recover and normalize with the pandemic winding down. Inflation started to creep up due to ongoing supply chain issues coupled with very high buyer demand.
- 2022 started out with an inflation rate (CPI) of 7.5% and continued a steep increase. The conflict in Ukraine had a tremendous impact on the energy sector and further increased inflation.
- Rising inflation prompted the Federal Reserve to start increasing interest rates in March. Mortgage rates went from the high 2’s in January to the high 5’s in June.
- In March and April, buyers rushed to purchase homes before interest rates increased further.
- Interest rate increases in May and June brought a significant slowdown in the Colorado Springs real estate market.
- Active inventory went from 549 homes for sale in January to 2,125 homes for sale at the end of June. This is a 400% increase in home inventory.
- The average sales price increased significantly from January ($494k) to June ($551k). The Colorado Springs real estate market hit a record average sales price of $561k in April.
- There is definitely a shift in the Colorado Springs real estate market. One weekend buyers were competing with multiple offers, and the next weekend showings and offers had decreased significantly and listings started to sit longer. But keep in mind that this is a shift that we needed in order to move toward a healthier, balanced real estate market.
Colorado Springs Real Estate in June 2022
Lastest Market update
The headline in our June stats is the 273% increase in inventory. While this is a staggering number, our market has struggled with low inventory for at least two years. Keep in mind that these statistics reflect the market from 4-8 weeks ago since most real estate transactions take at least 30 days to close. It will definitely be interesting to see how the current market influences continue to affect market stats.
Related Reading: Steps to Buy a Home
What to Expect in July
Our team has been waiting a long time to tell buyers that there are more homes for sale in Colorado Springs. It is a welcome relief to for buyers to be able to take a bit more time while house hunting and putting in offers.
The increased inventory and less frantic pace are great news for buyers. But buyers are still contending with home prices that are 10% above last year’s values combined with much higher interest rates that decrease their buying power. This has pushed some potential buyers completely out of the market until interest rates or pricing improve.
July is always a busy month during the moving season in Colorado Springs. Historically, our real estate market starts to slow down around mid-August when families are busy getting kids into the schoolyear. Our slower season could start a little early this year as we approach the July 27 meeting of the Federal Open Market Committee. They are expected to raise rates again and rates usually start increasing a few days before their meetings.
Related Reading: Steps to Sell a Home
It’s difficult to predict how things will continue for the rest of 2022. We all do our best to gather quality information and come to an educated hypothesis. One of the biggest threats that could influence our real estate market is reading only headlines. We all have “TLDR Syndrome” (Too Long, Didn’t Read). This is dangerous because when we only read the headlines, we miss the details and context. Avoid just skimming over the clickbait real estate headlines already popping up on social media. Be sure to get the full picture, remember that real estate is a hyper local industry, and reach out to us with questions. We’re happy to provide insight into the reality of our local market and guidance on what’s best for your specific situation.
It’s possible that we are headed for a recession. The average length of a recession is about 10 months. But a recession doesn’t necessarily mean a housing crash (see graphic below).Our real estate market is in a different situation than 2008-2009 because lending rules are much tighter and people are not likely to be underwater on their mortgages. We also currently have very low unemployment which is a huge difference from previous recessions. In fact, Denver’s market has been pretty similar to the market here in Colorado Springs the last couple of years. Denver was just ranked #12 for the markets with the lowest risk for a housing downturn during the next recession.
- Interest Rates: We have had a great couple of years with low interest rates but it was never meant to be permanent. Home buyers and homeowners are used to 2-3% interest rates and it’s always painful when those rates inevitably increase. It will take a bit for rates to come back down but they are widely expected lower again.
- Real estate is (and always has been) a long term investment: Housing prices surged during the pandemic. Homeowners got used to being able to sell their house within 6 months of a purchase and still walk away with a profit. This is not normal or sustainable in real estate. Remember the days when REALTORs advised buyers to hold a home for at least 4 years? Our market is shifting back to this reality. Real estate is a long term investment and we will start to see home value appreciation shift toward normal and balanced growth rates.
- Financing: It will be more important than ever to shop for a good loan and find an outstanding loan officer who understands what you are looking for. The best loan is not necessarily the one with the lowest rate. Work with a lender who can educate you about your options and work with you on the specifics of your situation. Please don’t go with a lender simply because you have you bank account with them. Reach out to us for local lenders!
- Buyers: Increasing interest rates mean that buyer demand will decrease along with home prices. Excess home buyer demand has already disappeared. The buyers in the market right now will have less competition and increasing leverage in negotiations. Steps to Buy a Home
- Sellers: Be conservative with your list price to get buyers in the door. Price your home strategically. You might walk away with less than you wanted from your home sale, but it will feel much better when you buy. Homes for sale in Colorado Springs are receiving an average of 2 showings per week. It usually takes about 12 showings to generate an offer, which means sellers should realistically expect their home to be on the market for 4-8 weeks with the changing dynamics. Consider waiting if you don’t absolutely have to sell right now. Steps to Sell a House