How are inflation and interest rates affecting the Colorado Springs housing market?

Two words – it’s still crazy (and it probably won’t change)! It’s obvious to everyone that inflation and higher interest rates are making it even more challenging for home buyers in 2022. It’s a double whammy. Home prices are rising at a continued rapid pace and combined with higher interest rates, a home buyer’s purchasing power is less than what it was even just six months ago.

There is a bright side though.

Increasing home prices and interest rates are two negative effects on the market that are actually causing some positive results. What do I mean by that? The real estate market is decelerating. We hesitate to say that it’s “slowing” as there is nothing slow about this market. We’re a long way from seeing a balanced market as it is still a strong sellers’ market. To give you an example of this, I will share with you what happened with a listing of mine recently. It was higher-end listing which saw only four showings on the first day, but surprisingly two sound, over-list-price offers immediately came in. That 50% ratio indicates that the market is seeing more serious-minded buyers. Additionally, buyers aren’t feeling the urgency to buy as they have been. As a result, buyers benefit as we’re seeing fewer Escalation Clauses, Appraisal Gap Guarantees and Inspection Waivers.

What about the bubble bursting?

Experts see the housing market continuing to rise as it has been barring, of course, a national economic catastrophe. Appreciation or inflation (whatever you’d like to call it) is continuing at a record pace (about 14% last year in Colorado Springs). A great number of foreclosures can trigger a bursting bubble. But with record equity increases, foreclosures should be minimal. Most homeowners can avoid foreclosure because they have enough equity that they may sell their homes, pay off debt and walk away with funds at closing.

Is real estate still a good investment?

Rental prices are increasing at an even greater rate with no end in site. The opposite is true for a homeowner. Once a home mortgage is secured, the unchanging monthly payments give the homeowner a sense of security. This makes real estate ownership a great hedge against inflation, therefore homebuyers and investors alike still see real estate as a wise investment.