Rates hit their high and came down, inventory locked up, sales dropped, and demand is still pent up. There is a path from here. News cycles in quarter one will pick up year-over-year comparisons, which will look worse, but watch the trends, feel the boots on the ground, and pay attention to inflation, job loss, and rates.
Did you see the smirk on the face of 2022 as she gave us one last gift on her way out the door? During the last 15 days of the year, rates jumped from 6.125 percent to 6.54 percent. An opening China, a hawkish Japan, confident Americans, a strong workforce, and light holiday trading were all to blame. But I saw the smirk as the door clipped her heels. It is a year that will go down in history as the worst year for mortgage rates in terms of the pace of the rate spike, but maybe it was just the bill coming due, the housing and mortgage market party coming to an end. If you add it to the previous two years and divide it by three, some might argue it was a fair price to pay.
The average Denver home appreciated 44.6 percent, reaching its peak in May 2022. Since then, it has given back 4.95 percent of the gains. Home sales exploded to levels well above anything we’ve seen in the past decade, with 64,000 homes sold in 2020 and 2021 dropping to an average of 60,000 homes sold in the last three years, still well above a Denver 2012-2019 average of 55,194. Rates plummeted well into new all-time lows and stayed there for much longer than any previous period in history. Even if we look outside housing to the stock market, there were gains of almost 50 percent. Add in 2022, and we are still up 20 percent from pre-covid levels.
So, where do we go from here? Well, it’s not going to get worse.
Rates hit their high and came down, inventory locked up, sales dropped, and demand is still pent up. There is a path from here. News cycles in quarter one will pick up year-over-year comparisons, which will look worse, but watch the trends, feel the boots on the ground, and pay attention to inflation, job loss, and rates. The Fed is moving towards raising the fed rate two more times by 0.25 percent each. This is already baked into the market. So it’s on inflation and jobs. When inflation drops further (which it will as supply has loosened up) and when wage inflation is curtailed by job loss, rates will drop below 6 percent, and the mood will change. 2023 will be a renormalizing year. Let’s break down what to expect for home prices, inventory, rates, and demand.
Source: https://www.dmarealtors.com