We are constantly asked: “what is going on in the residential real estate market?”; and this year it feels as if there are more people than ever wanting to know what 2023 will bring. We wish we had a crystal ball with an easy answer, but it is unfortunately not that simple. What we do have is historical data and recent market data to help us answer this question.
Let’s go back over a few key points from the 2022 market before we predict what 2023 may bring our way…
In June 2022 when the interest rates increased above 6%, the metro area market almost came to a standstill as buyers tried to wrap their heads around the loss of buying power & sellers tried to understand why they didn’t receive multiple offers the first weekend on the market. Those of us that had just put listings on the market, pricing them with the comparative sales for the past 3 months; found that our sellers had to make some substantial price reductions to get the properties sold. It was a 180 degree turn from what had been happening for the previous 5 months of 2022; when we had been receiving numerous offers at prices well over the list price after only being on the market for a day or two.
As with all things real estate, buyers & sellers needed some time to absorb what was going on, lenders needed to get creative so buyers could still afford to purchase properties; and the market in metro Denver needed to correct itself. After enjoying 8.15% appreciation (www.fhfa.gov) over the first 2 quarters of 2022, we found that to sell a property in the 2nd half of the year we needed to price listings approximately 10% below where we would have priced them in spring. We feel that this was a much-needed correction to the metro area market. After 10 ½ years of exceptional appreciation in the metro area, most homeowners have so much equity in their homes that this small correction did not have any effect on them.
Due to the continued low inventory over the 2nd half of the year, even with higher interest rates, we did not shift from a seller’s market to a buyer’s market. We still had less than 2 month’s supply of properties averaged out on all price points, and we can’t even start to think “buyer’s market” until we have 6 months or more of inventory. What did happen for buyers was that they suddenly were able to purchase a house for list price, or in many cases less, AND many were able to get a seller concession to buy down their interest rate or enough for a 2-1 rate buydown. (This is where the lenders got creative and is a whole other discussion that I would love to have if you want to reach out). Buyers also had a lot more negotiating power over inspection items which was a much-welcomed change for them!
We know that the demand was many, many times higher than the supply for those first 5 months of 2022 AND we also know that all those buyers didn’t just disappear from the metro area market. The question is, when are they going to jump back in? Typically (not including 2020-2022 as they are outlier years) the market really heats back up in March and stays that way through the end of June, but; based on the increase in the number of showings for the first two weeks in January and the increase in pending properties, it appears that more buyers are already getting back in the game.
In the past week showings increased by 14.5% while the number of new listings increased by 17%. We saw 813 units go under contract which was an 18.7% over the previous week. “I still firmly believe that the market will pick up directly following Super Bowl weekend whereas in the past we have seen purchase contracts increase by over 40% over the previous week.(Megan Aller ~ First American Title, data from RE Colorado.)
We would recommend buyers get out and look now while the inventory is rising, hopefully at a higher pace, than the number of buyers entering the market. Once March hits and we have more buyers come to the market, supply will most likely tighten up even more as many current homeowners choose to stay in their home with a very low interest rate rather than putting it on the market for sale. While interest rates still may be a bit higher than many buyers would like, we like to say: “Date the rate, marry the property and divorce renting”. You can refinance when the rates come back down a bit as everyone believes will happen, and maybe even later this year. It is less expensive to buy now and refinance later than to wait for an interest rate drop as at that point prices will start to rise again quickly.
We would recommend sellers begin the process now of getting your house ready to put on the market. Based on the uptick that we have already seen in activity over the first few weeks of January, we do believe that the prime time to get your house on the market for sale will be mid-February through June. Pricing the property correctly is of utmost importance, with expertise marketing & having your house “show ready” being the second & third most important factors. Mark & I have over 40 years of combined real estate experience and would love to answer any questions you may have with regards to buying or selling a property in 2023.
Kelly & Mark Williams
Broker Associates/Modus Real Estate