Continuation of the Housing Market Slowdown in Colorado Springs
The real estate market in the Colorado Springs area experienced another decline in home sales last month, with prices remaining steady. This can be attributed to the impact of increasing mortgage rates on the local housing market.
Based on the latest market trends report from the Pikes Peak Association of Realtors, which analyzed home sales primarily in the Springs and surrounding El Paso County, the following observations were made:
- In August, there was a significant drop of nearly 22% in single-family home sales compared to the same month last year. This marks the 15th consecutive month of year-over-year sales decline.
- The average time that homes spent on the market before being sold increased to 29 days in August, up from 17 days during the same period last year.
- The median price of homes sold in August was recorded at $480,000, exhibiting a slight drop of 0.1% from the previous year. Notably, home prices had been steadily increasing from December 2014 to November 2022. However, they began to decline in the latter part of 2022, experiencing year-over-year decreases in eight out of the last nine months.
- The supply of homes listed for sale in August totaled 2,420, which is an 8.3% decrease compared to the previous year. Although August’s inventory was higher than any other month since November, it still remained substantially lower than the levels seen prior to the Great Recession, where inventories were often above 3,000 and 4,000.
Similar to many other cities, the housing market in the Springs-area has undergone a significant shift since the second half of last year, mainly due to higher long-term mortgage rates.
For several years, historically low rates around 3% for a 30-year fixed-rate loan had stimulated a strong demand for single-family homes. This demand, combined with a limited supply of available properties, resulted in substantial price increases over an extended period. In June 2022, median home prices in the area reached a record high of $495,000.
However, the Federal Reserve’s decision to raise interest rates last year in response to rising inflation led to a subsequent increase in mortgage rates. By the end of last year, long-term mortgage rates had nearly doubled to over 6% for 30-year loans.
This trend of high interest rates continued during the initial months of this year. As of mid-August, long-term mortgages surpassed 7%, and the most recent data from mortgage buyer Freddie Mac shows that the national average for a 30-year fixed-rate mortgage stands at 7.18%.
The impact of higher mortgage rates has resulted in many potential homebuyers being priced out of the market, leading to a significant decline in sales. It’s clear that the real estate landscape in the Colorado Springs area is facing notable challenges amid these shifting market conditions.
Local real estate agents have indicated that despite current circumstances, there continues to be strong demand for homes. As a result, in conjunction with limited inventories, prices have not experienced drastic declines, although they have decreased from their peak levels.
The new home segment of the housing market in the Springs-area has also been affected by higher mortgage rates.
According to a recently published report from the Pikes Peak Regional Building Department, 127 permits were issued in August for the construction of single-family, detached homes. This figure represents a 15.5% increase when compared to the same month of the previous year.
However, figures from the Regional Building Department indicate that the rate of home construction during the first eight months of this year significantly lags behind the same period in 2022. From January to August this year, the total number of single-family detached permits issued amounted to 1,655, marking a 36.4% decline from the 2,604 permits issued year-over-year.