Will the Colorado Housing Market Crash in 2023?
The Colorado housing market is amid a major shift. The median sale price was down by 1.8% in February 2023 Y-O-Y, but the number of homes sold dropped 42.1%. As mortgage rates are at record highs in 20 years by 7.08%. Sellers are reducing prices as homes stay on the market longer. Buyers finally have some market power.
Economists believe the housing market will slow down but not crash soon.
Prices will fall, but not to the extent homeowners experienced during the Great Recession.
5 Reasons Why the Housing Market is Unlikely to Crash in 2023:
1. Low Inventory
As per August 2022 data, only a 3.2-month supply is available in the inventory. This ongoing scarcity of inventory explains why many buyers are still forced to bid up prices. Also, the supply-demand curve indicates that prices won’t crash shortly.
2. Lack of Newly Constructed Housing Supply
The supply of newly constructed houses has yet to return to pre-2007 levels. Also, there’s no way that they buy land, get regulatory approval, and increase the supply quickly.
3. Several New Buyers
There’s a strong demand for homes across various demographics. Millennials and Hispanics are in their prime buying years.
As a result, leaving no other option than low inventory.
4. Strict Lending Standards
Back in 2007, multiple cases of “liar loans” exist – no thorough credit checks, inflated values with none or minimal downpayment.
Lenders today place high standards on borrowers, and most who get mortgages have excellent credit.
5. Drop in foreclosures
A majority of homeowners own significant equity in their homes. The personal balance sheets of homeowners are much stronger today than they were 15 years ago, which is a clear difference between now and then.
As a result, there is no current threat of a foreclosure crisis.
Credit to HOUZEO BLOG and NAR data research 2/13/2023.