Is Colorado Real Estate “Safe?”
April 18, 2023 | Market Trends
You are reading a real estate article. You want to know two things:
These are valuable questions, and we do answer them below.
And yet it’s important to remember that over the last few years we got so caught up in appreciation rates and speed of the market that we forgot something. We forgot that real estate isn’t just a marketplace that represents making money.
It’s the place where our life happens.
Our home is a place that is a wholly unique combination of an asset, and a place where we live out our lives. It’s the place where our dreams are formed, our love is shared, we have babies, grow older and begin to find out what’s most important in this thing we call life.
As you think about your home, or the one in which you want to live, consider what brings you joy. Consider what inspires you. Consider what brings your family closer together.
It might be that you choose to love the home you are in and invest in adventure and experiences outside the home. It might be time to move to a new home that provides you the utility you want such as more space, more land, or a view that inspires your work and your dreams. Or maybe you want less space and less land to maintain.
We just need to remember that our home is a reflection of the life we are choosing to live and when we are very intentional about that choice, we can live a life full of remarkable experiences.
The characteristic driving activity in the Colorado real estate market is different from the last few years. People are now moving due to life circumstances rather than the craziness of making silly money in an unsustainable way through short term appreciation.
But is Colorado real estate safe?
As a short term easy money investment? Maybe. But there are short term national economic considerations that should give you pause if you are looking to make a quick buck.
But as a long term buy and hold place where you live your life in an appreciating asset? Absolutely.
The United States has a massive housing shortage by 6.5 million homes and rental rates increased almost 25% in Colorado last year alone. Our Colorado population continues to increase and demand continues to rise accordingly. Colorado real estate will continue to rise in value with short term ups and downs along the way.
Should you move? The question is, are life circumstances compelling you to move? Only you know.
Everything else comes down to strategy.
Overall the volume of activity in the Colorado market is lower than the last few years. Sales are down. New listings are down. Showings are down.
But prices are rising. Why? Supply and demand.
Over 90% of current homeowners have a mortgage interest rate below 5% and just under 70% of homeowners are below 4%. While they may want to move, they are hesitant to put their home on the market because they love their low interest rate (weird thing to love, huh?). This is keeping inventory low.
And while interest rates have risen over the last year, buyers have shown incredible resilience and a desire to move. Why? Life circumstances. Jobs, babies, inheritance, wanting out of that apartment or it’s time to have more or less space.
The volume of buyer activity is down, but it outpaces seller activity, driving up prices and driving down the number of days it takes to sell a home.
This has driven exactly what we expected in this spring market. A competitive landscape.
At the beginning of 2023, 75% of all properties were selling below the asking price. Today, that is down to 46% and going lower. Buyers are having to get more aggressive and sellers who are taking their time to properly prepare their home for sale are in a number of cases (Certainly not all) seeing multiple offers again and sales over the asking price. 35% of homes are now selling above the original asking price. Expect this number to increase over the next couple months.
Similarly, at the end of 2022 and through the first quarter 2023, sellers were having to reduce the price on their home at a pace we had not seen for 13 years. In January, 55% of all homes were experiencing a price reduction. Today, that number is down to 28%, and going lower.
In short, the economic principle of supply and demand has once again created an appreciating market for Colorado real estate. It’s not red hot like the last couple years. Rather, after a correction at the end of 2022, we are in a sustainable and appreciating, healthy long term market.
Yes, consumers should be prudent about the fundamentals that create stable circumstances in their life. They should consider their money in reserve and relative job security if they are going to buy and sell real estate.
But long term is Colorado real estate a good investment?
It’s hard to make an argument otherwise.
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