The past 12 months have been challenging for buyers in the Colorado Springs real estate market. Buyers had to navigate competing with multiple offers, bring a substantial amount of cash to the table for appraisal gaps, waive contingencies, and go up against a high number of cash buyers. The interest rate increases paired with an influx of new inventory mean that there is a shift happening in the market.
Shifts in the Market
Increased Rates, Decreased Buyer Demand
The recent Federal Reserve interest rate hike had a swift impact on the real estate market as mortgage interest rates increased significantly. Many buyers decided that it wasn’t the right time to purchase a home with their decreased buying power. This caused excess buyer demand in our real estate market to dwindle. Within about two weeks, homes for sale in Colorado Springs started sitting. Listings were no longer receiving multiple offers and took longer than a weekend to go under contract. Keep in mind that it was never “normal” for homes to sell within just a few days for well over list price. This fervent market reached a very abrupt inflection point.
Related Reading: How much home can I afford?
Increased Inventory, Decreased Sales Price
Additionally, more sellers entered the market and decided to sell their homes in recent weeks. May had 2200 new listings which is a 17% increase over last year. This is not unusual since we are in Colorado Springs’ busy moving season. But this made a huge difference when combined with the decreased buyer demand.
The increased inventory and decreased demand meant that our average sales price in Colorado Springs dipped $7800 from April to May. Fewer homes went under contract even though more inventory was available. Sales velocity has slowed down. Several home sellers were caught with this sudden change of market conditions. In May, 30% of all homes listed between $400,000-799,000 reduced their prices compared to 5% in February/March 2022.
Related Reading: Steps to Sell a Home
New construction home sales have fallen to the lowest level since April 2020 and missed their expected sales number of 750,000 by about 25%. Our team has started receiving emails again from builder reps marketing their available homes. Emails like this have been a rare sight over the past 24 months. In fact, last summer some builders were holding lotteries when new lots were released because the demand was so high.
Why are new construction homes suddenly available after builders couldn’t keep up with demand? Their buyers are falling out of contract because they can no longer afford the homes they started building when interest rates were much lower. Unfortunately, affordability has changed if those buyers decide to purchase an existing home instead. They’ll find home prices that are 16+% above last year’s prices and they now have to lock their interest rate at around 5-6% instead of 2-3%.
Related Reading: Where to Find New Construction in Colorado Springs
Keep it in Perspective
To be clear, the dynamics of the last couple years were unsustainable in the long term and it’s normal for things to eventually level off. Yes, there has been a shift. Is it still possible to sell your house? Absolutely. Is it still possible to purchase a home? Absolutely. You’ll start to read headlines that catastrophize what’s actually happening. You’ll likely hear from friends, family and even neighbors that a “crash is coming.” But make sure you reach out to a trusted real estate professional in your local area before you make any decisions or rule out options. We are here to answer your questions and help you navigate the decision that is best for your circumstances based on the reality of the local market.
What will the rest of 2022 look like?
This depends on several general economic factors. Will supply chain issues be solved and finally normalize? Increasing inflation rates are causing many people to hold off on purchasing items that only a few months ago were on their wish list. Diminishing demand would be helpful to normalize supply, maintain the speed of money, and tame inflation rates. The Federal Reserve will want to see significant improvement in inflation rates to avoid additional interest rate hikes. It takes about 6 months to see the full effect of interest rate hikes and many are anticipating another rate increase in September.
Things have changed. In recent months, most homes would sell with multiple offers regardless of what preparation the sellers invested in the property. This does not apply anymore. Increased inventory and decreased buyer demand means there is more competition for your home when it hits the market.
- Take the time to diligently prepare your home. Sort, clean and repair.
- Stage your home properly and make your home available to show as much as possible once it hits the market.
- Price your home competitively to attract enough buyers.
- Adjust your expectations. Don’t expect your home to sell in a single weekend. While listings were on the market for an average of 11 days in May, that number does not yet reflect the shifts in the market discussed above. Expect that number to increase over the next couple of months. We are still in a sellers market, but it won’t be as simple as it has been for the last couple of years to sell your home. It’s vital to have a trusted, local real estate expert on your team to help you navigate this process. Wondering if it’s the right time for you to sell? We’ll tell it to you straight! Click here to reach out to us or call 719-219-9739.
- Click here to download the Home Selling Guide
The danger zone for sellers will be when the media starts publishing articles about the real estate market “tanking”. This could potentially cause a panic among sellers who then try to list their home as quickly as possible and flood the market with inventory. It’s also possible that corporate investors could decide that it’s time to sell off large amounts of their portfolios in order to avoid significant losses. That could potentially have a huge impact and could drop the real estate market into a recession. Remember, unless you actually sell your house, there is not an actual gain or a loss financially. Our team is always here to answer questions and provide expert insight about what is happening in our local market.
Things have become a bit easier for you even though it came at a cost with increased interest rates. The good news? You might have a great opportunity to get into a home you love without competing with 20 other offers. Your home will still appreciate, but at a slower rate than the past few years. Keep in mind that interest rates go up and down and they will eventually go down again. This will be a great opportunity to refinance your home at a lower rate. Click here to download the Home Buying Guide.
Tip: Experts recommend keeping your eyes wide open during the last few months of the year to find a pretty good deal on a house.
It’s a dynamic real estate market right now. Our team is always here to answer questions and provide data and resources to help you make the best decision based on your personal circumstances. Questions? Email email@example.com or call 719-219-9739.