As we take a closer look at the performance of the housing market this year, it’s evident that Northern Colorado’s real estate landscape has experienced a pronounced shift from last year. With home sales down by 22.9% year-to-date across the region, a 10.9% decrease in the number of properties under contract, and median sale prices declining by 3.72%, it’s crucial to understand the factors influencing these trends.
In this column, we will explore the state of the regional market, examine the reasons behind these statistics, and shed light on the potential implications for both buyers and sellers.
Understanding the market fluctuations
1. Decreased home sales: The notable 22.9% percent decrease in year-to-date home sales indicates a shift in buyer demand and overall market activity from the past two years. Factors such as limited standing inventory, affordability concerns due to higher interest rates, and the state of economic uncertainty are all contributing to the reduction in sales activity. It’s important to note that 2020-2022 were distinctly anomalous years for real estate. Looking back at historical trends, we can see that our current market is following a pattern that’s a similar pattern to the pre-pandemic market of 2019, which was certainly still revered as a robust and healthy market.
2. Decline in properties under contract: On average across the region, “under contracts” are down 10.9%, falling from 1,206 in April of 2022 to 1,080 in April of 2023. I have stated previously that we certainly have stripped some demand forward from future years — meaning that people who might have waited to become homeowners jumped into the market to take advantage of low mortgage rates or other personal motivations.
In addition, many would-be home purchasers are now sitting on the sidelines, waiting for reductions in long-term interest rates. This wait-and-see strategy certainly poses some threats, as any reduction in interest rates is instantly met with increased housing demand, which puts further pressure on prices. Now is a great time to consider jumping into the market as demand is lower and negotiation power is higher for buyers.
3. Pressure on prices: The region has seen an average of 3.94% decline in median sale prices for detached homes year-over-year in April. We have certainly seen the return of hyperlocal real estate conditions as areas such as Berthoud (where prices are up 4.99% to $600,000), Fort Collins (+2.73% to $640,000), Severance (+2.35% to $535,000), and Mead (+2.11% to $585,000), which have all experienced median price growth year-over-year.
With limited inventory and high demand, we still expect prices will remain stable as we enter the prime real estate buying season as school wraps up and more families consider moving. This seasonal trend will also bring about a resumption in price pressures. We believe the year will end with relatively flat prices across the region.
Implications for buyers and sellers
1. Opportunities for buyers: The market conditions present opportunities for buyers to potentially negotiate favorable terms and secure properties at slightly lower prices compared to previous years. With the decline in median prices, prospective buyers may find greater affordability and a chance to enter the Northern Colorado housing market.
2. Adjusting seller expectations: Sellers should be prepared to adjust their expectations in response to the market’s dynamics. Accurate pricing strategies, proper staging and marketing efforts, and effective negotiation techniques will be essential to attract potential buyers and facilitate successful transactions.
3. Long-term market outlook: It’s important to consider the broader context and long-term market outlook when analyzing short-term fluctuations. Northern Colorado’s historically strong real estate market — with its desirable location, economic growth, and quality of life — suggests that these trends will be temporary and not indicative of a long-term downturn.
Brandon Wells is president of The Group Inc. Real Estate, founded in Fort Collins in 1976 with six locations in Northern Colorado. He can be reached at email@example.com or 970-430-6463.