Group Real Estate forecast: Fewer home sales in 2023

LOVELAND — Realtors will sell fewer houses in 2023 than they did in 2022, which was itself down from 2021. 

Brandon Wells, president and CEO of The Group Real Estate LLC, delivered the organization’s annual forecast Wednesday night. The message: Mortgage rates, escalating home prices, continuing low supplies of inventory and inflation’s impact on the biggest cohort of buyers — Millennials — all will dampen sales in the coming year.

He predicted Northern Colorado will see 8,970 home sales, compared with 9,966 in 2022 and 13,148 in 2021.

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He called 2022 a tale of two years, with the first half of the year seeing robust activity similar to 2021 but then a quick pivot in the second half of the year as mortgage rates rose and inflation took its toll.

Despite the lower number of sales, prices continued their upward climb in 2022; the median for the entire region, not including Boulder, Longmont and Estes Park, was $513,265, compared with $454,575 the year prior.

In 2023, he predicted that prices would be largely flat and perhaps hit $515,000. 

“2020, 2021 and the first half of 2022 provided a real estate market like nothing we’ve ever seen,” he said of the high demand, low supplies, rapidly rising sales prices, multiple offers and rapid pace of transactions.

The story was the same across the country in virtually every market, he said. But 2023, he predicted, would return to a hyper local dynamic with market conditions varying depending on local circumstances.

He reviewed the trends that have affected the housing market over the past few years and will likely continue to have influence.

Inflation, for example, was low as the pandemic began, and when the nation began to recover from the health emergency, the housing market got red hot. Then supply chain issues hit, along with the war in Ukraine. Wage price spiraling, caused when people in large numbers quit their jobs forcing employers to increase wages, also affected inflation. 

The nation hit peak inflation in June. Federal Reserve Board decisions to raise interest rates began to bring down inflation, but not before mortgage rates rose sharply, he said.

The signs now are good, Wells said, with inflation coming down and mortgage rates also coming off their 7% peak.

Another trend that the market has to work through affects the largest cohort of buyers, particularly first-time home buyers. Millennials were impacted by the Great Recession as they graduated from college and found it difficult to get a solid start on their careers. Then the pandemic and post-pandemic inflation hit them again. The result: For the first time ever, the median age of first-time home buyers hit 36 years of age, up from 34 years, Wells said.

Long-term, the housing market will see an upside because 20 million to 25 million millennials nationwide are coming of age to buy homes. This will cause “substantial demand support for housing, and it’s why our forecasts show prices holding steady,” Wells said.

Unemployment will not be a negative factor in Northern Colorado, he predicted, because the area has largely recovered from the pandemic, and unemployment rates are equal to or lower than what they were going into COVID.

To combat escalating home prices and mortgage rates that effectively reduce what buyers can afford, the region will see new styles of housing and greater densities take shape. Planners for three communities, Loveland, Windsor and Timnath, who joined Wells on the dais confirmed that builders are moving toward smaller homes, smaller lots, and greater density.

Scott Ballstadt, planner for the town of Windsor, said the town comprehensive plan calls for greater density and greater variety in styles of housing. Greater density also has a positive impact on water usage, he said. Windsor saw more multi-family permits issued in 2022 than single family.

Bob Paulsen, current planning manager for the city of Loveland, said Loveland also is experiencing more diversity in the new housing stock. Zoning law changes three or four years ago made room for smaller lots and increased product types, including micro homes, he said.

Multi-family housing is also on the increase in Timnath, said public works director Don Taranto. 

He said that buyers are demanding lower price points and builders are trying to comply.