COLORADO SPRINGS — When it comes to the 2023 Colorado Springs housing market, local realtors used terms like “anticlimactic,” “stagnant,” and “in hibernation.”
Key housing data points like new listings, sales, and sales volume were all down 23% last year, according to the Colorado Association of Realtors (CAR). All three indicators decreasing 23% was an interesting coincidence, CAR said.
Notably, although units sold were down, prices remained high. Jay Gupta, with Berkshire Hathaway HomeServices, Rocky Mountain Realtors, said this posed a significant challenge for the average buyer and affordability issues.
“For every person to go and buy in this market, when the inflation, cost of living is high, interest rate charges are high,” said Gupta. “For the sellers, it is a good market because they are still staying at record high prices, historically.
But Gupta said buyers aren’t coming to buy because they simply can’t afford it.
According to CAR, over seven years from 2015 to 2022, home prices increased at a rate more than double that of income. With a sizable middle-class workforce, this put a big squeeze on home buyers.
And since 2018, Colorado has built more housing units than population, which has made a dent in housing undersupply, but that’s expected to slow this year. On top of those factors, the high-interest rates continue decreasing homebuilder profit margins.
Another notable statistic, Gupta said, is in 2019, 72% of homes sold in Colorado Springs were under $400,000. But five years later, the numbers swapped with 72% of homes being sold hitting over $400,000.
With elevated interest rates continuing, CAR realtors also note some unprecedented trends they’re seeing in their day-to-day work.
Patrick Muldoon, president, and broker-owner of Muldoon Associates, said plenty of people want to sell their homes for a variety of reasons, but the current state of interest rates prevents it.
“We have people that absolutely want to move. And they can't because they're going to be trading out a 3 ½% or 4% interest rate to do what? Get into a 7%? We’re stuck,” Muldoon said.
Muldoon also noted in his 30 years of experience, that he’d never seen a market with such high rent and buy discrepancies. In his day-to-day, Muldoon said he anecdotally knows people who are choosing to rent the same house in the same area instead of purchasing.
“I've gotten a number of buyers that I've said, ‘Rent and keep saving money.’ Because in price points they're in, they can save anywhere from $750 to $1,000 a month renting the same property in the same area that they otherwise would have to buy,” said Muldoon. “So that's a lot of money nowadays when groceries are where they're at. And car prices are where they're at. And your gas is fluctuating.”
This week’s inflation report fell below the expectations of many economists, who were forecasting inflation to fall below 3%. Data from the Bureau of Labor Statistics show inflation dropped to 3.1% in January. The Federal Reserve has indicated they’ll cut interest rates once the Consumer Price Index continues trending downward to 2%.
Though cuts are still expected later this year, the decision is now likely delayed.
“Overall, the trend for mortgage rates is that they have come down. And I would expect, I think it's likely that they'll come down a little bit more, but it's very unlikely that we're going to go back to the 4 or 5% range that we'd kind of gotten used to,” said Bill Craighead, an economist and director of the UCCS Economic Forum. “I think we are kind of long term in a higher rate environment. So the fact that they've come down a little bit may shake loose some of those people who have been reluctant to sell [homes].”
Colorado Association of Realtors released its January Market Trends Housing Report this week, noting that sellers re-engaged and “buyers responded.” CAR said the report provided immediate optimism for realtors about the spring housing season and the year ahead.
Jay Gupta, with Berkshire Hathaway HomeServices, said he anticipates a modest increase of 10% in property sales this year with interest rate cuts bringing hesitant sellers back to the market.
Patrick Muldoon said he was less optimistic about much of an improvement in the Colorado Springs market.
“A lot of us have been waiting for something to happen and it's been two years of pretty much stagnant,” said Muldoon. “Right now, if you're selling, it's still a good time to sell and if you're buying, it's still going to be a stinger.”
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Email Senior Reporter Brett Forrest at brett.forrest@koaa.com. Follow @brettforrestTVon X and Brett Forrest News on Facebook.
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