Looking Back at 2022’s Real Estate Market
The beginning of 2022 looked much like 2021 with fewer than 300 homes actively for sale in our local Multiple Listing Service (MLS) and huge demand which was exasperated by near record low mortgage rates. If you wanted to get under contract and close on a home during the first quarter of 2022, you almost certainly had to pay more than the listing price, likely add a clause stating you would cover the difference if the appraisal came in low, and not ask for any repairs.
In January we saw mortgage rates at about 3%, but by June they had nearly doubled to almost 6%, and in October they pushed over 7%. This was shocking to all buyers who needed a mortgage to buy a home. To put this in perspective, if you were buying a typical home in our market with 20% down—at 3% your monthly mortgage payment would have been about $1,500, in October when rates pushed to 7% that monthly mortgage payment would have been about $2,400!
The jump in rates put many buyers on the sidelines, but what kept our market healthy was the continued lack of homes being put on the market. The number of new listings input into the MLS in 2022 was down more than 1000 units compared to the previous year and the fewest number we have seen in 7 years.
When you look at the inventory levels (the rate at which homes are selling) for the year, they went from about 10 days in January to just over 2 months at the end of the year. On the surface, a 400% increase is stunning, however when you look back over the past 20 years, we had never seen sustained inventory levels of 2 months or lower until 2015. The point to make here is that although our market has slowed, demand is still very healthy and the number of homes for sale continues to be below what is historically low.
As 2022 came to a close, the market felt like it was normalizing. Mortgage rates dipped about 3/4 of a point which gave some buyers new perspective and drew them back into the market. With lower demand over the last 6 months, we also saw home values increase at lower/more reasonable rates and in fact saw sales prices dip in December when compared to December 2021. The days of multiple offers and homes going under contract in less than a week are behind us. Buyers can now take a breath and be more selective when searching for a home. As for sellers, they need to understand that we are back to a more normal market where selling their home is a balance of time, money, and condition. This is where an experienced REALTOR® can advise them properly to help them meet their goals.
As we mentioned last year, Colorado Springs has created its own identity, independent of the Denver Metro Area: an energetic and growing downtown, wonderful & numerous event venues, an interesting and sophisticated arts & cultural scene, multiple & varied shopping experiences, top-notch & enhanced tourist attractions, and it continues to be one of the most supportive military communities in the country. All of these are factors that have made Colorado Springs a place people choose to live.
Fun Facts From 2022
- Most expensive sale: A home just north of USAFA on 213 acres sold for $7,000,000!
- Largest home sold: You might be able to squeeze into this home located in The Broadmoor Resort Community with over 22,000 square feet including an indoor basketball court and 6-car garage!
- Cheapest home sold: The town of Ramah takes bragging rights for the 2nd year in a row with the sale of a stick-built home for $50,000!
- Smallest home sold: A cozy little cottage with just 432 square feet in Fountain.
Quick Hits From 2022
- Number of units sold was 12,327, a drop of 175 units from last year’s all-time high of 14,929
- Average sales price for the year was $537,609 (up 10%)
- The median sales price was $473,727 (up 13%)
- The number of active listings on 1/1/2023 compared to 1/2/2022 tripled, but is still historically low
- Inventory levels for the year averaged just over 5 weeks, compared to just 2 weeks last year
- New home permits totaled 3605, down 1469 units
- 489 homes sold for $1,000,000 or more vs 394 last year vs 38 in 2015
- 79 homes sold for under $200,000 vs 3,736 in 2015
Why Olympic City USA Is Such A Great Place To Live
- Home to the United States Air Force Academy, Fort Carson, Peterson AFB, Schriever AFB, US Olympic Committee & 23 Olympic NGB’s, US Olympic Training Center, Northern Command, NORAD, US Space Force, Garden of the Gods Park, US Olympic and Paralympic Museum, Cheyenne Mountain Zoo, Pro Ro-deo Hall of Fame, and Space Foundation
- Outstanding higher education institutions; US Air Force Academy, University of Colorado at Colorado Springs, Colorado College, and Pikes Peak State College
- Diverse industries including Aerospace, Healthcare, Cybersecurity, Defense Technology, Military, Manufacturing, Sports, and Tourism
- Remarkable event venues including The Broadmoor Resort Hotel & Convention Center, Fine Arts Center, The Broadmoor World Arena & Pikes Peak Center, Weidner Field, and Robson Arena
- Excellent business climate – highly educated workforce, high-tech infrastructure, and local airport
- World-class trails for hiking and biking
- Centrally located to allow residents the opportunity to enjoy all Colorado has to offer: skiing, river rafting, “Jeep-ing”, ghost towns, hiking & biking
Trends in Fourth Quarter 2022
The 4th quarter of 2022 was volatile, to say the least. In fact, we have never seen a market change so dramatically, even when compared to the financial crisis in 2007/2008. We saw huge swings in many of the numbers we track:
- Active listings up more than 200% – New listings down 27.8%
- Sales down 35.7% – Inventory up nearly 400%
- Under contracts down 28% – Mortgage rates up 120%
Looking Forward to 2023
Looking at quarterly data for residential real estate allows us to really see trends. On the surface the results above seem scary because they are being compared to the insane (likely once in a lifetime) market we had 12 months ago. For example, having fewer than 300 homes on the market (as was the case in January 2022) was unprecedented and unfathomable. If you go all the way back to the year 2000, the average number of active listings in January for El Paso County was 2665 homes.
Using graphs that show 10 years of data allows us to give you some historical context. Anyone whose only experience in the residential market was during late 2020, 2021, and early 2022 has no real understanding of a “normal” market. One thing to remember when it comes to residential real estate, “pain” (house too small/too big, change in job, change it marital status, etc…) causes at least 15% of the population to buy/sell real estate in order to relieve that “pain”, no matter what is going on economically.
This year will be much more of a normal market than anything we saw over the past 18-24 months. Although sellers will not likely be receiving multiple offers and above asking price, they should be in a good financial position thanks to about 60% appreciation in their home over the last 5 years. Additionally, buyers will have the luxury of being able to compare homes and then decide on a home that best fits their wants & needs.
In 2023, we believe the lack of inventory and solid demand will keep the local market healthy. We anticipate home values will increase 1%-3% annually and the number of sales will grow in the range of 5%. The lack of homes on the market is a prob-lem that won’t be resolved in 2023 and will keep home values stable.
Colorado Springs and the entire Front Range continue to be attractive places to live and raise family. Although we expect to hear that Space Force Headquarters will be moved to Alabama, many Space Force jobs will remain here. The announcements of Entegris and Zivaro late last year are exciting for our area. We expect this trend to continue as we have a highly educated population, high quality of life and the cost of doing business here is lower than most of the cities with which we are competing.
With inventory levels below average and our expectation of a healthy local economy, we will continue to see a strain on available homes to purchase. This is especially true in the $300,000-$500,000 price range. Because of this we will continue to see more and more apartment buildings built during 2023.
Tips for Buyers in 2023—Compared to last year, this year will provide a real opportunity to buy a home you love and not have to waive appraisals and inspections to get it. Don’t confuse this with being a buyer’s market – expect to pay a fair price and receive fair concessions from the seller. This year we expect the sales price/list price to be just below 99% (down from 100.6% last year). Hiring an experienced agent will help you with negotiations on price, terms and inspection items. They will also help introduce you to excellent local mortgage representatives, reputable inspectors, and other contacts you may need leading up to, and after, your closing.
Tips for Sellers in 2023—The market has changed. It is likely your home will take 2-3 months to sell. If you want to sell your home for top dollar and in the fewest amount of days you need to be sure you are priced right and that your home is in excellent condition. Partnering with a local real estate agent will help ensure you do both. We can maximize the exposure for your home and negotiate terms on your behalf.
Most of the experienced real estate professionals we have spoken with over the past several weeks are excited about the normalizing of our local market. We expect 2023 to be a good year where buyers and sellers both find success in meeting their real estate goals.