2022 Colroado Real Estate Market Report, by Walter Huff.

2022 Colorado Real Estate Market Report

By Walter Huff

In as much as the pandemic made the Colorado real estate market shake and rattle for a while, the market showed resilience and was every bit as dynamic. In fact, looking back in 2021, it was the recordbreaking year for the days on the market, median sales prices, and mortgage rates for the colorado real estate market.

In order to understand the market accurately, we need to understand the dynamics of the market in 2021.

Inventory moved fast in 2021 in Northern Colorado just like in many other cities which created an extremely competitive market. Traditionally, a normal balanced market has about 6 months’ worth of supply which means that enough houses are available that it would take six months to sell them all. Except for the homes worth over $1 million, supply was tight and in some cases less than two months across the region.

Many people are led to believe that 2021 saw a constricted level of inventory, but some experts argue otherwise saying that the United States as a whole saw 6.1 million homes sold during the year which is the highest number since 2006. Locally, Colorado had an increase in the number of annual closed sales. This brings to question the issue of the ‘inventory’ myth. The fact is that there is no inventory, it is there but it’s not standing!

Another trend to watch in 2022 is the continuation of the home buying rush that started in 2020 hitting its full speed in 2021. Buyers are competing for the resale properties and bidding up prices. Many more looked to new constructions as a solution and while that was happening, homebuilders had enough problems to deal with. The supply chain wasn’t as easy as it used to be and this put many builders in a bind. As the price of lumber soared, many builders were forced to squeeze their margins on projects that were already under contract. For new contracts, it became increasingly more difficult to accurately price their customers. All in all, adjusting and readjusting contracts became an uncomfortable condition of doing business.

In addition to the fluctuating costs, lack of access to basic materials for building also made it hard for builders and consumers alike. Consequently, many builders were forced to stop taking on new contracts until prices would be more predictable and the supplies more reliable.

Now to add to all these problems, lack of buildable lots was also an issue. In response to the buyer demand, builders burned through their available lots in 2020 and early 2021.

2022 will be another interesting year for the Colorado real estate market. But the dynamics of the rising interest rates may hamper the growth opportunities of the housing market. But one thing that is for sure, is homeownership equity growth will continue its upward trajectory. Unfortunately, new construction will continue to be limited imposed by the lack of skilled labor as well as supply chain issues for materials.