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When Will Rates Stabilize?

Those markets which appreciated the most, along with an abundance of new construction, will see the biggest corrections. As you know, Denver saw incredible appreciation adding us to the list of least affordable metros to buy. New construction in Denver has also not been scarce, yet as of November, Denver single-family home permits dropped 64 percent from their cycle peak in March 2022. The last time we saw these low permit numbers was in 2014.

This drop-off in new construction, in addition to low existing home inventory, mortgage rate stabilization, and demand recovery, will all support home prices. If you believe that inflation will go back up, the Fed will have to get more aggressive in raising the fed rate, and mortgage rates will increase, slowing demand again, thereby dropping home prices. I don’t believe that. I believe inflation has seen its peak, both locally and globally. Rates will stabilize, and demand will pick back up. But not quite yet. Through the first quarter of 2023, we will see some buyers come out and take advantage of seller credits and discounts, further lowering respective home prices. Quarter two will see prices flatten out from their descent, then turn slightly upwards in the second half. All that assumes inflation will be curtailed, and rates will start their move into the 5’s. 2023 overall appreciation will be in the low single digits by year-end. Remember appreciation was only 2.5 percent in 2019, and it was a good year.