REAL ESTATE NEWS

A Year-End Retrospective

Everyone knew that 2022 would be a turbulent year for the economy. For one, the F.E.D. had announced that they would be rolling back their pandemic measures to combat high inflation.

Many did not expect Russia to invade Ukraine, which put pressure on world markets, including oil/gas and agriculture. Russia is a significant exporter in both industries, especially minerals used to make fertilizer. In addition, Ukraine produces high percentages of the world’s grain, iron, and steel exports. Between interruptions to trade, political sanctions on Russia, and investor fears, this significantly affected a world economy already reeling from the pandemic.

The European conflict, among other factors, threw the U.S. economy into fresh turmoil. As a result, stocks tumbled throughout the year. Although they bounced back from their lowest point in September, they are currently on track for their most significant losses since 2008.

Inflation skyrocketed to rates not seen in the U.S. since the 1980s! This forced the F.E.D. to take an even more aggressive stance against inflation. For real estate, mortgage interest rates doubled this year, from 3.25% in January to around 6.5% today. While dramatic, the sharp rise in mortgage rates returned them to levels closer to the 30-year average. However, buyers sure did step on the brakes as a result! This year marked the most significant decline in new mortgage applications on record.

So, what comes next? Although people think we are already in a recession based on the shorthand definition: two consecutive quarters of negative G.D.P. growth, it has still not been called that by the entity that declares it: The National Bureau of Economic Research. Instead, they combine a broader range of economic factors to declare a recession. However, a growing number of experts feel like an actual recession is likely to begin in 2023. Exactly when that happens is anyone’s guess, but the popular opinion has shifted from 1Q23 to either 2Q23 or 3Q23.

That means that slow real estate sales will likely persist for at least a few months and possibly longer into the summer than previously expected. Based on current trends, our in-house experts predict that home prices will see +/- 3% growth over the year. Modest price declines are likely in specific neighborhoods that are not as resilient to recessions (we have a specialized map for that if you are interested!) It is still a seller’s market now, but we may gradually shift closer to a balanced market the longer a recession drags on.

(Info Sources: The Wall Street Journal, C.B.S. News, Reuters, U.S. Trade Representative, Google Finance, CNBC, Fortune.com, F.R.E.D., Forbes)

LOCAL MARKET UPDATE

Metro Denver’s Performance This Year

Although the world and national trends impact what is happening locally, let us look at the real estate stats for Metro Denver. Although Dec. data won’t be ready until Jan., we can see from the November market snapshot that inventory was up almost 180% from last November!

That is a massive increase for one year. However, based on the,e decrease in new listings, it is not because more homes are coming to the market, but rather, homes are taking more than twice as long to sell — 34 days on average.

Home sales were down 46% in the same period, mainly due to the mortgage above rate increases. The good news for homeowners is that home prices continued to rise despite the economy at large, around 4.6% on average, year-over-year. Unlike many other investments, real estate remains a reliable hedge against inflation.

INFO FOR SELLERS

A Shifting Market Means Different Buyer Expectations

If you want to sell a home this winter, it is essential to note that although we are still in a seller’s market, buyer expectations are shifting. Over the past couple of years, sellers may not have had to try as hard to sell their homes quickly and at a premium — that is not necessarily the case today. Now that rates are between 6-7%, many buyers will have higher monthly payments. They also have more options to choose from. You may improve the curb appeal and make other repairs to sell faster and stay competitive.

You should price your house accurately and not try to inflate the value so you do not need a price reduction. Lastly, be sure to make showings as easy as possible. If a buyer has difficulty getting a showing or the house does not show well, they may move on.

INFO FOR BUYERS

This Winter Could Be a Great Opportunity

Now that inventory is back up to levels not seen in years, you might have more room to negotiate with sellers. Since the pandemic, some buyers have started to waive their inspections again or not ask for many concessions. But now that inventory has gone up and homes are taking longer to sell, you might have a great chance to talk with sellers who have had their homes on the market for 20, 30, or maybe even 45 days, and you have more room to negotiate the price and repairs.

Plus, 30-year mortgage rates are currently down from their recent peak in Oct./Nov., so your monthly payments might be less than last month. Spring will likely be more competitive due to real estate seasonality, so this might be a great chance to buy before things ramp up again.

*We use reasonable efforts to include accurate and up-to-date information. However, the real estate market changes often. We make no guarantees of future real estate performance and assume no liability for any errors or omissions in the content.