FORT COLLINS – Home sellers will see prices rise in 2023, but they may have to wait until the end of the year, and they’ll have to be patient as prices slowly return to their mid-2022 peak.
That’s what Windermere Real Estate Services Co. Chief Economist Matthew Gardner said at the annual real estate and economic forecast event Wednesday night hosted by the company’s Northern Colorado branch, based in Fort Collins. Gardner is based in Seattle; Windermere operates in 10 western states.
The reasons for today’s conditions.
- Gardner says the Federal Reserve has started too late to tame inflation. Multiple, large target rate hikes, which in turn pushed up mortgage rates, dampened home sales and caused asking prices to fall.
- Homeowners sitting on mortgages below 3% (about 25% of homeowners fall into this category) are unlikely to sell because they won’t be able to meet their current interest rate. That limits the supply.
- Meanwhile, first-time homebuyers are being delayed by both supply and interest rate issues.
Gardner predicted that despite the Fed’s 0.25 percentage point rate hike this week and the largest in a month, mortgage rates will stabilize and fall from their 7.12% peak last year to 5.4% by the end of the year. “They could drop to below 5 percent in 2024,” he said. “We will return to normalized levels, but they will not return to 3% or lower.”
“This year we will see a decline. It’s not 2007 again. It’s more like 1990. we’re going to see a couple of quarters down, a modest reduction this year,” Gardner said.
“Blame the Fed. They have only managed to manage inflation three times in history,” he said.
In addition to inflation rates driven by supply chain issues, the COVID pandemic, rising wages as people leave the workforce and other reasons, Gardner said inflation is also driven by corporate profits. “There are a lot of price increases going on,” he said.
He predicted that Congress would reach an agreement on the debt ceiling, but “if the debt ceiling is not raised, the recession will be much worse than what I’m showing here.”
Northern Colorado will add jobs this year, “but it will be much slower than you’re used to,” he said. Employment growth will be from 1.1 percent to 1.2 percent, he predicted.
The construction of new apartments will continue. In Larimer County, he expects 10,215 units to come on stream over the next five years. In Weld, he expects 11,580 new households within five years.
Sellers have been “having their way” in the market since 2012, and that’s changing. Northern Colorado is moving toward a more balanced market where buyers and sellers have more equal power over sales.
“The market is actually good. I don’t worry about it. You will [sellers] pay back some of the amazing price growth you’ve experienced over the past few years.
“Prices will stabilize and then you’ll see prices rise again, but at a significantly more reasonable pace,” Gardner concluded.
— This article was first published by the independent news organization BizWest and is published under license. © 2023 BizWest Media LLC. You can view the original here: Housing Economist. The market will stabilize during the year
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