Market Picking up early 2023
The holidays are behind us, but housing market predictions are looking favorable for the coming year. January proved to be a fickle weather month. With thirty days registering below fifty degrees, there was snow on the ground for much of the month. That is not typical in the area and affected showings.
Although not as robust as they were last year, mortgage applications rose three percent last month. With fluctuating interest rates, refinancing applications were up almost twenty percent. During the month of January 2023, interest rates swung between 6.375% and 6.5%.
A popular tool in the home buying process was using a permanent buy-down of rates. Over fifty percent of purchasers used this option last month. In a nutshell, this means Buyers paid upfront to bring down their interest rate. When the market was slowing during the holiday months, many purchasers asked Sellers to pay those fees. Buying down a point on your loan costs one percent.
For every $100,000 you borrow, it would cost one percent ($1,000) to lower your interest rate one percent (point). Over a quarter of purchasers last month bought down their rates over two or more points. On a $500,000 loan, that would be an additional $10,000 the borrower would have to bring to closing to lower their interest rate by two percent. Depending on how long you plan to live in your home and what interest rates do soon will determine whether it’s in your best interest to consider buying down your rate.
Housing Market January 2022 to January 2023
The good news for Sellers is that prices continued to rise. They were up three percent year-over-year from January 2022 to January 2023. Not as quickly as we’ve seen in the past few years, but still a healthy real estate market. The average sales price in El Paso County in January was $523,441. In the long run, even with a lagging economy, real estate is a sound investment. Current housing market predictions are that even though things are not changing as rapidly, they are still on the up-turn.
One statistic that changed the most dramatically between last year and this is the time a home stayed on the market before it sold. Last year a home typically sold within two weeks. This year it’s more like two months. But we’re still in a strong Seller’s Market. Unless we get to four months of inventory, it will remain a Seller’s Market.
The number of houses that sold last month was down over thirty-four percent from last year. But another huge change in the market was that Active listings were up over two-hundred-fifty percent from last year. (346 last year vs 1,234 this year)
This is a snapshot of what happened with existing single-family homes in El Paso County, Colorado, between January 2022 and January 2023.
New listings were down almost twenty percent, but that’s not unusual for this time of year. Last year was especially brisk with so little inventory, but there’s a different mindset this year as people are hesitant to make a move, waiting to see what the market and interest rates will do in the coming months.
Housing Market Changes December 2022 to January 2023
As we moved into a new year, the number of Active listings were down over fifteen percent (1,459 to 1,234). That coincided with the number of sales between December and January which were down fifteen and a half percent (753 to 636).
New listings were up month-over-month by over fifty-two percent. The average Sales Price between the months was up six percent. The number of month’s supply remained the same at just under two months, again showing a strong Seller’s Market.
Will Home Prices Drop in 2023?
According to national experts, the housing market predictions are that we have probably hit the bottom of the market. While it will not be a rapid increase (as in the past few years), they expect us to see a continual increase in home values as the year progresses.
Of course many variables will play into this prediction. The most important variable at this point in time is what the Feds are planning to do with interest rates. There were predictions that as we head into the Spring of 2023, rates were supposed to mellow out with not as big an increase as we saw last year.
Unfortunately, there are rumblings that might have been a pipe dream and rates will continue to rise. Only time will tell.
If you are ready to buy, it’s probably not in your best interest to wait. There are no indications that prices will fall dramatically this year. Even if interest rates come down, you can always refinance. But before the Spring thaw in the market when everyone rushes to list their home, now is still a great time to buy.
But if you’re thinking of buying or selling a home this year, consult with an expert. With almost three decades in the business, I keep a close eye on the market to make sure my clients have the most up-to-date information possible. Call me and let’s discuss your particular situation.