Colorado Real Estate – The First Half of 2023

Many people experienced the first half of 2023 Colorado real estate holding their breath. What was going to happen to interest rates? Was the economy going to stall? Would real estate crash? Was it going to be another roller coaster like 2022?

The good news is all of our predictions played out exactly as anticipated. Not because we are really good “guessers.” Rather, because there were market fundamentals and obvious economic drivers we could analyze, we just arrived at the most logical conclusions. 

2023 Real Estate Predictions

Below are some of the market factors we analyzed at the end of 2022 in predicting the 2023 Colorado Real Estate Market.

• The Consumer Price Index (measure of inflation) would drop considerably, but the FOMC (part of the Federal Reserve) would continue taking aggressive action to control long-term inflation and raise banking interest rates aggressively.  
• Mortgage interest rates will be volatile and remain higher than what consumers grew accustomed to over the previous five years. But, rates would come down some, and consumers would emotionally and financially adapt and actively buy and sell. 
• Buyer and seller activity would be driven by life circumstances such as babies and marriage, death, jobs, and divorce more than the simple desire to buy a new home driven by cheap capital. 
• Buyer activity would be lower due to higher interest rates. 
• Seller activity would be lower because over 90% of consumers had an interest rate below 5% and 70% below 4% on their current mortgage. Even if they wanted to move, many were in love with the payment they had on their current home and would be hesitant to give it up.  
• Population migration to Colorado would remain steady but lower than in years past.  
• Building starts would slow even further as banks became even more conservative with speculative lending practices.  
• The housing shortage would continue. 

And the ultimate prediction from all of this is; prices will rise in 2023. While demand would be suppressed by the higher cost of capital (interest rates), inventory would remain low, balancing the supply/demand ratio, and prices would climb from where we started in 2023.  

The average sold price for a single-family residence started off 2023 at just over $690,000. By the end of June, that average sales price was just over $811,000.

Now these prices are just holding steady with the spring and early summer of 2022. The average sales price never reached the peak of 2022, but the $811,000 average sold price was slightly higher than the same time in 2022.  

The remainder of 2023?

So where will 2023 real estate end up? Prices will be lower than where we are now, but simply because of “typical” seasonal patterns. While lower than now, most likely, prices will end the year 3% to 5% above where we ended 2022.  

These seasonal patterns mean that buyer activity declines in the second half of the year, inventory climbs, the marketing time of a home takes longer, and the average sales price of a home drops through December.  

We see it every year, and it is nothing to freak out about. These seasonal factors are already playing out. What’s important is knowing how to adapt behavior in these changing market conditions. Below are our recommendations for buyers and sellers.  

BUYERS

For buyers, this shifting market will be a great opportunity. There will be more homes to choose from, less competition, and potentially lower interest rates in the months to come. If you have been waiting for the market to “cool,” now is the time. Get back in the game.

Be smart, get completely underwritten for your financing before writing offers on homes, and you will be able to negotiate with sellers from a position of great strength.  

SELLERS

For sellers, you will have more competition, and prices will be declining through year-end. Take more time to prepare your home, making sure it stands out from the competition, and you will still command great value for your property.  

Take a little more time with your agent to price your home, understanding declining values between now and year-end.  

And, for most homes, it will take longer to sell than the height of the spring selling season. Plan on buyers wanting to negotiate things like inspection items, price, closing dates, and who pays for closing costs.  

Conclusions

Colorado real estate is as strong as any market in the country. We remain one of the top places to live, migration remains strong, our economy is one of the top in the country, and inventory remains low. 

But remember that real estate is hyper-local. One city, one neighborhood, or even one block might perform better than another due to many subjective factors. If you are a homeowner and aren’t considering moving, you may still want to work with your trusted real estate professional today to understand how the market is impacting your home value.  

For most people, their personal wealth exists as equity in their home, and my job is to help you make the best decisions for you and your family, short-term and long-term, relative to how you want to live and the wealth you are creating through real estate.  

I’d be happy to help you with a mid-year assessment of home value, even if it just gives you peace of mind.