Colorado Springs-area home prices spiked to more record highs last month, as local real estate agents wait to see if rising mortgage rates trigger a slowdown in demand and a cooling off or even a reduction in housing costs.
“Not yet,” said Joe Clement, broker-owner of Re/Max Properties in Colorado Springs.
The median price of single-family and patio homes sold in April shot up to $484,450, nearly $60,000, or 14%, higher than the same month last year and topping March’s record of $475,000, according to a Pike Peak Association of Realtors market trends report.
The average sale price of homes in April climbed to $561,907, also a record high and 16.6% or $86,050 higher on a year-over-year basis, the association’s report showed.
April was the third straight month in which median and average prices set record highs.
The Realtors Association’s report and Gazette historical data also show:
• Home prices now have climbed on a year-over-year basis every month since December 2014 — a streak that’s approaching 7½ years.
• On a percentage basis, prices have increased by double digits for 22 straight months.
• Home sales totaled 1,489 in April, which was identical to the same month last year. Over the first four months of 2022, home sales totaled 4,919 or 2.9% more than the same period last year.
• Properties averaged 12 days on the market before selling in April, slightly more than the nine-day average in April 2021.
• The supply of homes for sale totaled 969 at the end of April, up 74% from the same month a year ago. Though inventory is on the rise, it remains well below historical norms; five years ago, in April 2017, there were 1,570 homes for sale.
Clement said his team of brokers sold three homes in April, whose asking prices were in the $400,000s. Each home had roughly 30 showings, more than 10 offers and sold for $40,000 to $60,000 above asking price, he said.
“We just seem to keep plugging right along,” Clement said. “Putting things on the market, we’re getting tons of activity. The showings are there. And they sell. ... It’s crazy. It keeps going.”
Patrick Muldoon, broker-owner of Muldoon Associates in Colorado Springs, listed a home last weekend for $800,000. It’s under contract for a figure that’s over the seller’s asking price after it received multiple bids, he said.
Whether the market continues its breakneck pace, however, will depend on several factors, Clement and Muldoon said.
Thirty-year, fixed rate mortgages rose to an average of 5% nationally in mid-April, and last week were at 5.1%, according to mortgage buyer Freddie Mac. A year ago, rates hovered just below 3%.
If rates climb another percentage point and beyond, Clement said, some buyers will have to lower their sights and look for smaller homes, while others might be priced out of the market altogether.
“If they keep going, and all of a sudden we’re at 6, 6½, I think we’ll start to see it and feel it,” Clement said of higher mortgage rates. “It will start eliminating people from the market because their house is shrinking and their payment is going up.
“They’re not able to go to $475,000 or some number,” he said. “They can only go to $400,000. Well, what happens then? It’s smaller, it’s not as nice. They still might buy it. But there’s going to be an interest rate number that starts affecting things negatively. But it’s not hit yet. It just hasn’t.”
Muldoon also said mortgage rates could rise to a point where monthly payments make homes unaffordable for some buyers and push them to the sidelines.
”I don’t know if, let’s say, 5% is the breaking point,” Muldoon said. “I do believe there is a threshold that if interest rates hit, it absolutely will affect it (the market). I just don’t know if it’s 5 or 5.3.”
If rates climb to a point where buying slows, supplies of homes for sale could rise, and the combination of a cooling demand and higher inventory might cause prices to stabilize and even drop, Clement said.
The impact of higher long-term rates probably won’t be seen on home sales and prices until May or June, Muldoon said; April home sales were based on mortgage rates that buyers probably had locked in before they hit 5%.
In the meantime, other global and pocketbook factors could affect the housing market, Muldoon said.
A few months ago, the economy was strong and consumer confidence was high, he said. Now, there’s a war in Ukraine, inflation is running rampant, gas prices have soared and the stock market has faltered.
Employer layoffs and even a recession could be next, which also could weaken the pace of buying and selling, though that’s difficult to say for certain, Muldoon said.
“We’ll know in the next 60 days,” he said. “I think we’ll be having a different conversation. We’ll have some direction. We’ll start being able to see the (mortgage) payment difference affecting people ... the inflation, the gas, the food. I think in 60 to 90 days, we’re going to have a feel for what’s going on as those things all start to grip into people’s paychecks and livelihoods.”