Is It Still a Seller’s Market?
Sellers in Colorado Springs have enjoyed a very hot seller’s market for the past few years. As we begin 2023, it’s not as hot as it was last summer, but is now a more moderate seller’s market with less than two months of inventory of houses for sale.
What’s the difference between a Seller’s market and a Buyer’s market? When there are four or fewer months of homes for sale, it is considered a Seller’s Market. A neutral market is five or six months of inventory. A Buyer’s market is is when there are more than six months of houses available. “Months of inventory” means if no other houses were listed, it would take two (or four or six) months to sell what is currently available.
Single-family new-build housing starts were at their lowest levels since May 2020. There is no indication that will change anytime soon. People who got the remarkably low interest rates over the past few years are staying where they are. These components are contributing to the lack of inventory in Colorado Springs, which in turn keeps prices from coming down too much.
Mortgage rates will play a big part in whether or not prices come down somewhat or continue to rise on a subdued climb. Mortgage applications are at their lowest levels in over two decades. The economy, the world’s political situation, inflation, interest rates, the fear of a recession – these factors will contribute to how the housing market reacts.
Most financial experts see a likelihood of a recession in the economy in 2023, being brought about by the Federal Reserve’s rate hikes. That will keep the housing market suppressed, especially the first half of the year. A stronger real estate market is anticipated the second half.
Housing Market December 2021 to December 2022
There have been some interesting shifts in the market from the beginning to the end of 2022. The average price of a home was down slightly (three percent) from the same time last year, just under $500,000. In 2021, homes were selling above asking price. At the end of this year, houses were still selling for close to ninety-nine percent of asking price. This is another indication of a healthy seller’s market.
Instead of selling within the first two weeks, homes are currently taking over a month to sell once they’ve been placed on the market. The number of new listings being down over thirty-six percent (normal in December) and the number of houses sold down forty-two percent, has given us more inventory. More inventory also contributes to why homes are taking, on average, forty days to sell.
The number of active listings between last December and this December is up over 243%. But an inventory of less than fifteen hundred homes for sale is way below normal and keeps us at a relatively healthy seller’s market.
Much of what we saw in market changes in the latter half of 2022 was a direct result of rising interest rates. As we headed into the new year, interest rates were hovering around 6.9%. In the middle of January, they are at 6.375% and are expected to come down slightly over the coming month.
Housing Market Shifts November to December 2022
Between November and December 2022, there was an almost 32% drop in new listings. This is not unusual for homeowners who don’t want to list their house as we approach Christmas. Most people don’t want to show their home as they are preparing for the season.
The number of listings was down over 25% between November and December, with many people waiting until January to close on their homes that we Under Contract before Christmas. The average sales price was down six percent in that month’s time, slightly high but not out of the ordinary for the end of the year. That was a reflection of rising interest rates and a seasonal norm.
As we head into 2023, mortgage rates are showing a slight decline, which should breathe some new life into home sales.
Will Home Prices Drop in 2023?
The housing market shows no signs of a crash, but we are experiencing a shift, a deceleration of how fast prices are rising.
In a housing market crash, home prices drop twenty to thirty percent and home sales slow dramatically. Many experts believe the worst is behind us and the housing market may have already reached the bottom.
Remember, real estate is always local. Prices will keep rising although at a slower rate. Interest rates will not see three percent again for many years to come, if ever. If you are thinking of buying a home, it is not in your best interest to wait. Housing supply is still limited, so be prepared to act quickly if you find a home you love.
Homeowners have more equity than they have had in decades, giving them a solid footing. So don’t find yourself disappointed because you waited too long in anticipation of a market crash. The chances of that are very unlikely unless there is a total shift in the economy.
If you are thinking of buying or selling in this ever-changing market, find an agent who is well-versed with the ups and downs of real estate. Call Mimi Foster today to discuss how you might profit while others wait for a falling sky that’s not on the horizon.