Lisa YoungI'm often asked if the crazy home price increases in Northern Colorado can keep accelerating at the pace they are currently. And, buyers wonder if there will be a moment in the future that home prices will be cheaper so they can jump right in.
My opinion is that Northern Colorado homes will not decrease, and might even increase substantially in 2022. Here's why in a nutshell.
NOCO is a desirable area where people are still moving to in great numbers.
Inventory remains incredibly low.
Listings are receiving multiple offers which are significantly over asking price. Most have guaranteed appraisal gaps, so if the property doesn't appraise for the offer price, the buyer will bring the extra money to closing.
Certain areas, like Fort Collins and Loveland, are in short supply of vacant and buildable lots. So the idea of building to keep up with demand is not feasible.
Buildable lots need water-- and in Colorado water comes with a significant price, driving lot prices even higher.
Colorado draws many investors and cash buyers who keep the demand high. Property taxes are reasonably low- making the overhead for landlords lower.
Lisa in CO's bottom line is that prices will continue to rise--even if the interest rates creep up. Inventory will not meet demand.
OWNERS: So, if you own a piece of Colorado, you are in great shape and are increasing your wealth.
SELLERS: You will get a nice chunk of change from the sale of your property-especially if you have good curb appeal and the property is in great condition. Your home will still sell if it's not in great shape, but don't expect competing offers!
BUYERS: Start by working with a lender to see what your price range is and save for that downpayment consistently. Work with a Real Estate Agent who will patiently help you look over the long haul until you find the right property. If a property has a few of your checkboxes filled -make a quick decision and jump. The longer you wait, the higher prices will be.
FOR MORE INFO: Check out the latest post by "KEEPING CURRENT MATTERS" they state: After almost two years of double-digit increases, many experts thought home price appreciation would decelerate or happen at a slower pace in the last quarter of 2021. However, the latest Home Price Insights Report from CoreLogic indicates while prices may have plateaued, appreciation has definitely not slowed. The following graph shows year-over-year appreciation throughout 2021. December data has not yet been released.
As the graph shows, appreciation has remained steady at around 18% over the last five months.
In addition, the latest S&P Case-Shiller Price Index and the FHFA Price Index show a slight deceleration from the same time last year – it’s just not at the level that was expected. However, they also both indicate there’s continued strong price growth throughout the country. FHFA reports all nine regions of the country still experienced double-digit appreciation. The Case-Shiller 20-City Index reveals all 20 metros had double-digit appreciation.
Why Haven’t We Seen the Deeper Deceleration Many Expected?
Experts had projected the supply of housing inventory would increase in the last half of 2021 and buyer demand would decrease, as it historically does later in the year. Since all pricing is subject to supply and demand, it seemed that appreciation would wane under those conditions.
Buyer demand, however, did not slow as much as expected, and the number of listings available for sale dropped instead of improved. The graph below uses data from realtor.com to show the number of available listings for sale each month, including the decline in listings at the end of the year.
Here are three reasons why the number of active listings didn’t increase as expected:
1. There hasn’t been a surge of foreclosures as the forbearance program comes to an end.
2. New construction slowed considerably because of supply chain challenges.
3. Many believed more sellers would put their houses on the market once the concerns about the pandemic began to ease. However, those concerns have not yet disappeared. A recent article published by com explains:
“Before the omicron variant of COVID-19 appeared on the scene, the 2021 housing market was rebounding healthily from previous waves of the pandemic and turned downright bullish as the end of the year approached. . . . And then the new omicron strain hit in November, followed by a December dip in new listings. Was this sudden drop due to omicron, or just the typical holiday season lull?”
No one knows for sure, but it does seem possible.
Bottom Line (KCM)
Home price appreciation might slow (or decelerate) in 2022. However, based on supply and demand, you shouldn’t expect the deceleration to be swift or deep.
