With such a booming start to the year in terms of real estate, it has many people wondering what’s in store for the rest of the year. There is good and bad news (but mostly good!) for both buyers and sellers in the mid year real estate forecast for Colorado Springs.
Many experts anticipate interest rates to increase in the 3rd and 4th quarters of 2021. While not substantial increases, even just a slight increase could affect purchasing power for potential buyers. However, a slight increase may also help curb some of the insatiable demand for homes and rates will still be well below historical averages.
Many experts are projecting a rise in interest rates. The latest Quarterly Forecast from Freddie Mac states: “We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.”
Home Price Appreciation
Home prices are projected to continue to rise throughout the rest of the year, but many forecasters believe the rate of appreciation will begin to calm down. This is great news for buyers as the large increase in home prices will begin to level off. However, sellers don’t have to worry about their homes losing value; rather homes will start to appreciate at more normal and sustainable levels than what we’ve been seeing.
An important factor in today’s market is the number of homes for sale. While inventory levels continue to sit near historic lows, there are indications we may have hit the lowest point we’ll see. In April, we only had 443 homes for sale in the entire Pikes Peak Region! However, last month we had 775 homes for sale. While this is still only a 0.43 month supply of homes, we are starting to see more homes for sale than in the past few months. As of 7/20 there are 894 homes for sale. Even though these numbers may be half that of previous years, experts agree that more homes will start to enter the market later this year. According to the latest Monthly Housing Market Trends Report, supply levels are continuing to increase, which is different from the typical summer market:
In June, newly listed homes grew by 5.5% on a year-over-year basis, and by 10.9% on a month-over-month basis. Typically, fewer newly listed homes appear on the market in the month of June compared to May. This year, growth in new listings is continuing later into the summer season, a welcome sign for a tight housing market.
New construction has been down since the pandemic began, mostly due to supply shortages and shutdowns. Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says recent research could indicate upward momentum when it comes to new home construction. Evangelou refers to the volume of new homes where construction began during a set period, known in the industry as housing starts. According to that research, housing starts reached their highest level since 2006 in March of this year – an encouraging sign for the industry. While they dipped slightly in April, Evangelou reiterates that the level of housing construction is heading in a positive direction compared to recent years:
“…we are currently building 24% more homes than we typically have built in April in the last couple of decades. Thus, housing construction is trending upward with housing starts likely to reach 1.6 million for all of 2021 and rise further to 1.7 million in 2022.
THE BIG PICTURE
- Increased Inventory
- Increasing Interest Rates (slightly)
- More options for buyers
- Increased competition for sellers
- Homes appreciation to slow down
If you are looking to buy, don’t wait. As more homes slowly enter the market, you may find yourself with more options. However, don’t be fooled- it is still very competitive out there and you won’t want to miss out on your dream home. Plus, as interest rates and home prices increase, you will lose some purchasing power the longer you wait.
If you are looking to sell, the longer you wait, the more competition you may have.
If you are thinking of buying or selling, please contact us so we can help come up with the best strategy for your situation!