A Look Ahead at 2022

  • Rob Thompson
  • 05/3/22

What Can We Expect From the Real Estate Market in Colorado Springs and Denver?

The closing of the calendar year offers us the perfect opportunity to reflect, analyze, and predict. In the real estate world, there’s a lot to look back on in 2021, and 2022 promises to be just as eventful.

Looking Back on 2021

Colorado real estate saw huge growth in 2021. Homes in the Pikes Peak region saw price appreciation of nearly 20% on 9% higher sales volume, meaning that both inventory and demand increased from 2020. In Denver, sales volume decreased by 20% as prices appreciated by 9.5%.

Throughout Colorado Springs and Denver, inventory has struggled to keep up with demand due to various overlapping factors:
 
  • Pent up demand due to COVID: As the restrictions and lifestyle changes brought on by the pandemic ebb and flow, common priorities and mindsets shift as well. Ever since the first lockdown, many people who used to enjoy city living are now looking for more space to spread out, private outdoor areas, and a home to care for. 
  • Historically low interest rates: Mortgage rates are still hovering around 3%, making homebuying budgets more powerful and bringing payments within reach for more buyers than before.
  • Millennials, the largest generation, entering the housing market in record numbers: As millennials adjust to changes brought on by COVID, like less travel, many are ready to settle down in one chosen area, and some are beginning to raise families. 
  • Lower than normal builder production: Home builders are still coming back up to speed from the great recession and are now dealing with supply chain issues that cause backups on each level. 
  • Location flexibility: Many homeowners now have the ability to move from higher-cost markets like New York and San Francisco due to the new work from home norms.
These factors are powerful, and they aren’t going to vanish overnight. This is not a bubble. Supply is short for the current demand, which drives prices and home values up. Until supply catches up or demand decreases, prices will continue to rise.

Outlook for 2022

It’s unlikely that we’ll see the Colorado real estate market shift much in 2022. Fannie Mae predicts a ~50% shortage of homes available to meet normal demand of buyers in 2022 a gap that may take two to three years to normalize.
 
Supply chain issues aren’t going away soon, and current backups will need to be addressed before new projects can pick up speed. This will continue to fuel the inventory problem in the first half of the new year, as it impacts builders’ ability to keep up with demand.
 
Interest rates will rise a bit. While each increase chips away at buying power, economists predict that we’ll see a total increase of less than 1% between now and the end of 2022. Even at 4%, rates will remain historically low, enabling more people to afford homes than before the pandemic if they can win a bid.
 
By spring, there will be a slight increase in available inventory due to builders’ efforts and the end of the mortgage forbearance program. Homeowners that may have lost their jobs during the pandemic did not need to sell due to forbearance but that program is coming to an end.
 
First time homebuyers will continue to face challenges competing for available homes. Investment companies and wealthier individuals will continue to diversify stock gains and invest in real estate, impacting demand.

Conclusion

All factors indicate that the market we’ve experienced over the last two years will continue for the foreseeable future. While inventory problems will begin to ease on the national level, Colorado will continue to see an influx of homeowners coming to the market.

I expect buyers to come out of the woodwork after the holidays, making winter a great time for sellers to get top dollar while inventory remains low. Spring and summer will see much higher sales volume, but the increased inventory may be welcome news for buyers looking for a home.

If you’d like to learn more about the real estate market in Colorado, or if you’re thinking of buying or selling a home, please Contact me.
 
 

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