The Colorado Springs housing market continued to roll at full speed last month, although long-term mortgage rates that topped 5% caused some buyers and sellers to hold back, according to some local realtors.
“We’re going to downgrade, I think, from the 120-mile-per-hour freeway to maybe more like an 80-mile-per-hour Wyoming freeway,” said Rick Van Wieren of Re/Max Properties in the Springs.
“It’s still going to be a pretty fast market by historical measures, but it won’t be as hot as it used to be,” he said. “Interest rates of 5% to 5½% are keeping some buyers out of the market. That’s having an impact.”
A Pikes Peak Association of Realtors report released this week shows housing trends remained largely unchanged last month in the Colorado Springs area.
The median price of single-family homes sold in May hit a record high of $487,000, eclipsing the previous mark of $484,450 set in April, the report said.
Last month’s median was also up 12.7% from May 2021, extending a streak of year-over-year price gains to 7.5 years. Median home prices in the area have now increased every month since December 2014.
Home sales, meanwhile, totaled 1,689 in May, up 8.9% from the same month last year. In the first five months of 2022, sales totaled 6,607, up 4.4% from the same period last year.
The supply of homes for sale jumped to 1,365 at the end of May, the most for a month since 1,390 were listed for sale in July 2020.
Still, the inventory of homes for sale in May equated to less than a month’s supply available for purchase, based on the number of listings and the recent pace of sales.
May inventory also remained historically low; in the years leading up to the Great Recession, May listings typically exceeded 3,000 and 4,000 homes, according to records kept by The Gazette.
These trends aside, there are a few indicators that the market has cooled somewhat due to rising borrowing costs for homeowners, according to some real estate agents.
On Thursday, 30-year fixed-rate mortgages averaged 5.09% nationally, according to mortgage buyer Freddie Mac. That’s down slightly from 5.1% last week, but up significantly from 2.99% at the same time last year.
In May, homes were on the market an average of 11 days before they sold, one day longer than the same month last year, according to the report from the Association of Realtors.
Another possible sign of a market pause: In the past seven days, 229 sellers have reduced the asking price for their homes, which is rare in the market, Van Wieren said, citing data from the Multiple Listing Service.
“It’s an effect,” Van Wieren said. “There were months where we saw almost no price reduction because everyone was bidding above the asking price.”
Eddie Hurt, estate agent at ERA Shields Real Estate, said some buyers simply couldn’t afford a home anymore due to rising rates. He estimated that 10-20% of buyers are affected by the higher rates, which he called a significant portion of the market.
“For buyers in the lower price ranges, we’re seeing some of those people being shut out of the market right now,” Hurt said. “To get the house they want, they can’t afford the mortgage payment now. We’re also seeing that buyers in the upper brackets have to go down the price bracket instead of buying that $800 house. $000, they now have to buy the House at $700,000, $650,000.”
Yet the market does not stop, said Hurt and Van Wieren.
Although some buyers may have been shut out of the market, sale prices in May were still 103.13% of the list price, meaning buyers generally paid more than the asking price during the month, according to Van Wieren. .
By comparison, from 2006 to 2016, buyers consistently paid less than the full asking price, according to data from Van Wieren.
“It’s important, but it’s not like the market is in decline,” Hurt said of buying and selling a home. “It’s slowing down a bit.”
“I think the buyers for the last decade, and then some, are as high as the rates have ever been in the last 10 years,” Hurt added. “For people who are newer to the market, newer on the buy side of the market, it’s shocking to them and it might cause them to back off or wait.”