Homebuyers Are Defying Expectations
Are you considering buying or selling a home in Colorado this spring? According to a recent video from Altos Research, the state’s housing market is defying expectations in a few key ways. On the one hand, there aren’t as many homes for sale as you might expect, limiting the supply side of the equation. On the other hand, while there are fewer buyers than last year, there are still enough to keep the market moving. But what does all this mean for you as a potential buyer or seller? And how might the market shift as we move deeper into spring? Read on for a breakdown of the latest data and insights from Altos Research.

Executive Summary:

  • Sellers are not bringing as many homes to market as we’d expect (supply side is limited).
  • Not as many buyers as this time last year (which was our strongest year ever), but we certainly have enough buyers.
  • In 4Q22, rate shock slowed market so much that Colorado homes UC were -40%+ from prior year.
  • Sales count in 4Q22 off more than -30%+ as a result.
  • UC counts have improved in 1Q23 a lot since buyer activity is relatively strong.
  • This means there are few homes to choose from and that might not get much better as spring progresses.
  • No chance of any large (> 5%) price declines in Colorado, and odds are now more likely that prices will go up slightly in 2023.
  • If you have buyers:  LOOK NOW, don’t wait until later in spring, as inventory is likely to get tighter.
  • If you have sellers:  Listing now is a good idea but listing anytime this spring (before mid-May) should be very attractive due to limited inventory.
  • If you have trade-up clients, get on it ASAP.  There’s more willingness to take contingent offers than this time last yet, but I doubt that will last

My detailed notes from the video            

  • Employment continues to be strong, so there are enough buyers that are willing to purchase.
  • Fewer sellers than usual; so we are back to the supply-side constrained doom loop we have been experiencing for a few years.
  • With good buyer demand and limited supply, inventory continues to fall.  Before COVID, inventory usually would RISE not FALL in February.

Total Inventory Homes For Sales – US Single Family

  • Historically, inventory should grow 1-2% / week at this time of year; we are seeing inventory declines instead. 
  • We have 46% fewer homes on market now than we did at same time in 2019 (pre-COVID).
  • It’s not just demand driven, though:

Weekly New Inventory Single Family Residential Listings

  • Only 58,000 new listings in US this week vs. 67K (more typical) last year. 
  • Sellers like their 3% mortgages, apparently.  Chart above, red = new listings and pink = new listings this week that went UC right away.
    • (as an illustration, we listed my daughter’s condo for $300K last Thursday… 6-7 showings, one offer for 2% less than ask… solid market, but certainly not Feb ’22!)
  • Since demand is strong, the few sellers that are out there are not doing a lot of price declines:

Percent of Properties with Recent Price Reductions – US Single Family Homes

  • Though the number of price drops is higher than the historical average.
  • Look at the 2022 pink line… started really strong (very few price drops due to insane demand)
  • Then the line gets really high as the high mortgage rates dried up all of the buyer demand (so more price cuts needed to move product)

Total Single Family Homes Pending Contract with New Contracts Per Week

  • Looking at pending (under contract) (chart above)…
    • A steady climb in home sales is coming, as you would expect for this time of year (normal seasonality)
    • However due to supply side constraints, we have 23% fewer UC than this time last year.
    • This is a massive improvement from 4Q22 when we were down 40%+ in UC vs. last year.
  • Buyer demand is strong, closing the gap… I imagine we’ll have a supply side problem that limits our number of home sales in rest of 1Q and possibly 2Q too.

So what does it mean for prices?

Median Home Prices – US Single Family

  • Prices are increasing from the holiday lows (normal seasonality)
    • With the supply constraints, doesn’t seem to be any reasonable possibility of prices dropping.
    • In 4Q I was concerned about a small price drop in Denver in ’23.  That seems less likely now.
  • The average price of the homes listed in the US this week is exactly the same as the average price this time last year.
    • The high rates are keeping a lid on what buyers can afford. 
    • Sellers can get their homes sold, but they don’t have enough pricing power to raise prices much.
  • After a nice trend of mortgage rates drops, rates did go up in the last week (the strong employment numbers likely drove that)
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Chris Lopez
Chris Lopez is a Denver area real estate entrepreneur and investor, as well as the host of Bigger Pockets’ House Hackerz and the Denver Real Estate Investing Podcast.
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