Mortgage interest rates took a bit of a tumble, coming down to 6.29% for a 30-year fixed mortgage, according to MortgageNewsDaily. Overall it has been a decrease from a high of 7.37% on October 20th, and a high of 7.30% on November 3rd.
The recent headlines have been that “mortgage rates plummeted!” but don’t let that fool you. From a high of 7.37% on Oct 20, we are down slightly over 1%.
However, and here’s the kicker: The Fed is planning a 50-point basis hike shortly, so that should bring mortgage rates back up and above where they were just recently at 6.62%.
Currently though, the rates are still lower, so if you are waiting to get your rate locked in, now might not be a bad time.
Home values in Colorado Springs have increased 39.4% since March of 2020 (COVID). They have decreased 9.57% (average) or 10% (median) since April 2022. So anyone who bought at least a couple of years ago is still sitting on a good chunk of equity.
November continued to be a slow month for real estate. What I have been seeing is that home prices seem to be at the values they were selling for in the September 2021 – January 2022 timeframe. Sellers should plan accordingly if they are looking to sell in this market.
Properties are not selling at these crazy high values anymore, and many sellers are needing to be more realistic when it comes to their list prices.
Inventory is higher now, at 3.1 months for the city. 4-6 months is considered to be a healthy, balanced market between buyers and sellers.
The Fed has made it clear they will continue to raise the basis points, but at a slower rate, looks like 50 basis points, or half a point. I expect lenders to adjust their rates to borrowers accordingly.
Nearing the end of 2022! What’s happened to the housing market so far, and what should we expect for 2023? Will home prices continue going down?
There are 1,558 properties for sale in Colorado Springs right now. There are 120 property sales in Colorado Springs for December so far. July is when the number of sales started to slow, and in October and November, we saw an even further slowdown in home sales.
For Colorado Springs, the current median and average sale price is about what it was back in January and the end of last year, as you can see in the graph below:
Home prices have dropped from April 2022. From April, again, we are at a 9.57% drop in average sales prices, and a 10% drop in median sale prices, for Colorado Springs so far.
What is the result on the housing market?
This is causing homes to sit on the market longer, at 39 days on average. It’s not quite a buyer’s market, but the buying frenzy is over. Many buyers are waiting for home values to potentially drop even further. The tension of high home prices plus increased interest rates has removed the motivation for many buyers.
Fed Chairman Jerome Powell has made it clear that they “still have some ways to go” before they SLOW DOWN the rate of interest rate increases. Note he is not saying they will stop the increases at any point. He’s saying they will eventually reduce the increase in basis points when they KEEP RAISING THEM.
Fannie Mae predicts a further slowdown in sales for 2023. They predict fewer sales in 2023 (3.9 million) than what we had in 2008 (4.12 million), nationally. They project 5.67 million for the final sales of total homes in 2022.
From all the signs I’ve been seeing, yeah, I’m fully expecting a hard hit on the housing market for at least the next 12 months. I don’t yet know what that will look like for home prices. I do have a guess though. Listing agents and sellers are starting to understand that they need to price their properties at values homes were in 2021, in order to sell them.
As the economy tightens up further next year, people will continue spending less, and that includes on property. There will still be home sales, but they will be fewer, and only for those who absolutely need to move.
It’s not a positive future outlook, but that’s where it looks like we’re headed.
Many buyers are hesitant to buy in this market. If they can afford to wait, home prices may come down further. Over the long-term, home prices are still high. If you look back up at that chart, home prices are at the same values they were for late 2021.
No one knows if prices are going to continue falling, or if there will be a renewed demand next year for homes as the interest rates may fall.
We also may be out of our mini recession this year, as both GDP and CPI both rose in this 3rd quarter of 2022. GDP rose by 2.9%, and CPI rose by 0.4%.
I don’t know if we’ll see more homes hit the market, but the demand from buyers is not currently what it was.
The slow sales are understandable due to the general slowness of the holiday season. It’s very much like a balanced market right now. Many sellers are offering financial incentives to buyers to help pay buy down the buyer’s loan interest rate for the first 1-3 years. Sellers are willing to offer this kind of incentive in order to make the buyer’s loan payments smaller, in order to get more buyers in the door, literally.
Meanwhile, buyers are wondering if home prices are going to continue to fall. If they’ve waited this long to get into a home, “why not wait a few more months to see what happens? Besides, the holidays are here and I don’t want to have to buy a house during that time.”
There are certainly buyers in this market still, but they have specific needs, and they aren’t tied to the mortgage rates and timing their purchases. Buyers are choosy right now, and rightfully so. Property reached the most expensive it’s even been back in April, and now those prices are coming down. Meanwhile, interest rates shot up from last year, adding on hundreds or thousands to a buyer’s monthly mortgage payment.
There is a housing market silver lining
Some good news is that FHA, VA, and USDA loans are assumable. This means that if you have one of these loans, you could let a buyer take over your loan, and pay you the difference in equity since you bought the property. You could then do the same thing with another seller who has the same kind of loan.
In this way, both you and the buyer of your property get to assume an existing mortgage with a lower interest rate. Pretty neat! You just have to come up with the difference in equity, in cash. So, depending on how much more the property is worth…
Houses will be more expensive to afford next year, even if the prices don’t go up. Rent will go up next year. This is not a surprise. This is coming. It’s irrelevant if anyone finds this unbelievable. I’m preparing for a reality that many people are shouting is coming.
Rental Housing Market info
These are the highlights of the rental market here in Colorado Springs. Read the full report at ApartmentList.
Rents in Colorado Springs decreased 1.8% month-over-month in November, compared to a 1% decrease nationally. Month-over-month growth in Colorado Springs ranks as the #19 sharpest decline among the nation’s 100 largest cities.
Year-over-year rent growth in Colorado Springs currently stands at 5.1%, compared to 16.7% at this time last year. Rents in Colorado Springs are up by 27.8% since the start of the pandemic in March 2020.
Median rents in Colorado Springs currently stand at $1,226 for a 1-bedroom apartment and $1,535 for a two-bedroom.
A Tragedy in Colorado Springs
Our Thanksgiving was abruptly invaded upon by a hate crime shooter, further taking away what peace we have held onto in these past few hard years. On November 20th, a 22 year old man entered Club Q nightclub here in Colorado Springs and opened fire. He killed 5 people and injured 18 before he was subdued by two heroic patrons in the bar. Police arrived within 6 minutes of the 911 call being placed.
That shooter does not represent our city. We are a community of support and love, and we will work for our brighter future that those victims, their families, and friends deserved.
This is a horrendous tragedy for our city and for the LGBTQ+ community. It was a senseless act, a hate crime that everyone has rallied against. People all over the country, not just in our city, have voiced love and support for the victims’ families, friends, and community.
Colorado Springs has had 5 mass shootings other than this most recent one: one last year, two in 2015, and one in 2007. Denver, Aurora, and Boulder have also had mass shootings, among the rest of the state.
It doesn’t get better in other states.
If you would like to support the victim’s families, you can donate through their verified GoFundMe page: https://www.gofundme.com/f/support-for-the-club-q-families-and-survivors
The Colorado Healing Fund is another fund that was accepting donation for the Club Q tragedy. However, it was discovered that they are pocketing 15% of the donations before they turn around and give that money to sub-charities and non-profits. They’re just being a middle man for no reason, and siphoning off money that was supposed to go to the victims’ families.
The collection site through GoFundMe is giving 100% of the donations. This is the one I donated to. If you would like to support the victim’s families, you can donate through their verified GoFundMe page: https://www.gofundme.com/f/support-for-the-club-q-families-and-survivors
Conclusion
It’s a slower time for real estate here in Colorado Springs, but the housing market is still active. Sales are still happening, but buyer confidence is low, due to the home prices being the highest they’ve ever been, interest rates more than double what they were a year or two ago, an uncertain economy, and an uncertain global future with Russia.
The beauty of Colorado Springs continues to draw in those who can still afford to buy and sell. The mountain range view, proximity to nature, hiking, and the slopes, high altitude, friendly people, and a vibrant business community, make Colorado Springs an attractive tourist spot or new place to call home. I should know, I’ve lived here quite a while, and I love it here!
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