If the last few years have taught us anything, it’s that there is no true predictability in the world of real estate…or in the world in general. However, we can always take stock of what we do know in order to formulate an idea of what’s to come. Based on past trends, current data, and my years of experience as a Colorado Realtor, here’s what I expect to see in Colorado real estate in 2023.
More Normalcy
While the gradual slowdown of the housing market may feel like a negative shift when compared to the frenzy of competition in 2020 and 2021, what we’ve seen throughout 2022 is actually a return to normalcy and balance within the housing market. Instead of scrambling to outbid one another with all-cash offers, buyers can finally slow down and select the home they truly want. While sellers need to be more strategic than they were a couple of years ago, most homes are still appreciating at impressive rates.
No More Panic Buying
Interest rates are still higher than they were in previous years, but that doesn’t necessarily leave buyers at a huge disadvantage. While buyers do have to grapple with a higher interest rate, the restored market balance means that most buyers do not have to escalate the purchase price in order to win a contract for a home. In addition to more reasonable prices overall, these contracts can now include space for buyers to ask for repairs after inspection, which was rarely the case two years ago.
In terms of offsetting the impact of those increased interest rates, many buyers are able to negotiate an interest rate buy down from the seller. Even in cases where this is not an option, it’s important to consider that this period of lower competition makes it the prime time to buy your dream home with the intent of refinancing to lower interest rates in 1-2 years.
Inventory Will Remain Tight
Even though higher interest rates have cut down on buyer competition, there is still not quite enough existing inventory to keep up with the demand of the Colorado housing market in 2023. A myriad of factors will contribute to this, only one of which being that Colorado is a wonderful place to live!
In addition, many current homeowners in Colorado are unwilling to sell because this move would mean trading in their current mortgage rate for a higher rate on a new loan. Especially in a more balanced market, this move can feel difficult to justify during a period of economic uncertainty. Finally, new home starts are expected to drop due to a decline in builder confidence brought on by the relative slow-down. In a time when we need new inventory in order to keep up with demand, I don’t expect to see builders keep pace.
Double-digit Appreciation
For sellers who have owned their home for two or more years, we have seen double-digit appreciation of home values. However, this doesn’t mean we expect the home to fly off the market over a matter of a few days the way we did in 2021. Selling a home in 2023 will still require more patience, as the average days on market currently sits at 43 days, compared to 3 days one year ago.
Sellers should be prepared to negotiate price or concessions to help with the buyer’s interest rate. While sellers are still in a great spot to see huge appreciation on their homes, the importance of proper pricing, strategic marketing, and spot-on staging is magnified in this more balanced market. Working with an experienced Realtor is particularly important for sellers in the 2023 market.
Increased Home Buying Activity
Expect to see increased home buying activity at the beginning of the year. Many buyers decided to wait out the initial shock of the interest rate increase, but are now ready to return to the market. This is a smart move, because waiting to buy after prices come down will not work: we’re going to see price appreciation continue, but at a slower rate. For renters looking to enter the housing market, time is of the essence because rents continue to increase at a higher rate than home prices.
There’s no simple equation to tell us the exact right timing for buying and selling real estate, but partnering with a Realtor who understands your needs can help you plan strategically! If you have questions about the upcoming year in Colorado real estate or if you’d like to discuss your plans to buy or sell, give me a call at 719-337-7254 or 720-498-9592.
