Video Transcript Below:

Will 2023 be a good year to buy or sell real estate? With the recent tech layoffs and inflation still being high and the high cost of eggs…. Everything feels a little uncertain right now. If the truth is that the answer to the question is whether or not this is going to be a good year for Real Estate is really going to matter on your local market. In this blog, I’ll be discussing real estate predictions for the mountain markets of Colorado that I serve. If you’re looking for real estate predictions in your market, reach out to me on social or via my email below and I will connect you to someone in your local market who can give you local market data. 

In order to know where we’re going in 2023 in real estate we need to look at how we wrapped up 2022. When we look at real estate stats we look at the rolling averages of sales. That might be over 12 months, six months, or three months. So let’s take a look at 2022 as a whole, and the last quarter of 2022 (but not so much the month of December because we know the month of December is always down compared to the rest of the year). If we’re looking at 12 month rolling averages for 2022 Summit and Park County respectively saw a 13% and 12% appreciation. This is about on par with national averages. Summit County tends to trend a couple of points above the national average when it comes to appreciation rates and they kept on trend this year.

This is a good time to remind you that the mountain markets of Colorado don’t follow the same trends as say Denver, Colorado Springs, or Fort Collins which we like to refer to as the Front Range. In the Denver area, they saw home values drop between one and four percent depending on where you were in the metro area. So if you are used to hearing that because you in the metro area, just keep in mind that our Mountain markets don’t function the same way as they do because macroeconomic factors impact our markets differently. Mainly because we are predominantly secondary homes and not primary.

If we shrink our view to the last three months though we do actually see price drops up here in the mountains. Park County saw over a 30% drop in home values. In Summit County we only saw a 0.09% drop. Lake County and Chaffee County either held steady or went up in value. Now before you get excited that home prices are going to be coming down up here in the mountains there are a couple of things to keep in mind. Remember that we’re a heavily seasonal market, so fall tends to see lower home prices than summer. (*Fall can be a great time to find a deal on a home that has sat on the market all summer)

Price drops that we saw in the end of 2022 could indicate a trend, but we really are going to want to look at the first months of 2023 to see if that trend is going to continue. The other thing to keep in mind, especially in Summit County is that the average overall price drop was driven by very specific parts of the county and by very specific types of properties. Single-family homes across the county actually went up 2.4% in value in the last quarter of the year. And if we’re looking at individual parts of the county, the town of Blue River Saw higher appreciation rates in 2022. The types of properties that brought down that average were condos and townhomes. The reason that we see certain areas of town go up significantly in value and then other zones like Zone 3 in Breckenridge will jack these off a bit of a price drop is mainly driven by short-term rental rules.

The last thing we look at other than home prices is how much inventory we have. In 2022 we saw inventory rates drop compared to 2021, and as we wrap up 2022 we actually had about half the amount of inventory that we did in 2020. So while we did see home values drop in some areas we’re actually sitting at a level of inventory that still indicates a seller’s market.

So what do these trends mean for 2023? The low inventory was mainly driven by high interest rates which hurt a lot of buyers power, and then they stepped out of the market entirely. Sellers knew that it wasn’t the best time to sell and chose not to sell. Those high interest rates were a result of the federal government trying to curb inflation. Just this month the CEO of Morgan Stanley said “clearly inflation has peaked” and if that is true then we are likely to see interest rates start to come back under control.

The biggest difference that we’re going to see in 2023 versus 2022 is we’re not going to have the volatility of interest rates which scared so many buyers. As interest rates start to come back down we’re likely to see a lot more buyers re-enter the market. But the question that remains is how many sellers are going to decide that this is a good year to sell? Most sellers don’t have to sell right now because they have so much equity in their homes, and so many homeowners refinanced when we had those historically low interest rates. On top of that here in the mountains of Colorado we have a lot of secondary homeowners who have the ability to short-term or long-term rent their properties while they wait for market conditions to be preferable for them to sell for the most money. All of these factors indicate that we’re not likely to see inventory go up that much. Redfin and some other National sources agree with that estimating about 16 percent fewer total sales over the course of 2023 than we saw in 2022.

The hyper local differences that we saw in appreciation rates across the counties are likely to continue as well because these short-term rental rules were put in place in the last couple years. They had an impact on the market but those impacts are likely to continue as those short-term rental rules stay in place. Summit County’s moratorium on short term licenses in the unincorporated parts of the county does lift in March, but the new proposed rules are looking to reduce the number of licenses in those areas. We’re not likely to see new licenses issued in those areas, and we’re not likely to see a shift in the market when the moratorium is lifted.

Lower interest rates could help more buyers enter the market. But if more buyers enter the market, and inventory stays low that’ll likely mean that home prices actually go up over the course of the year. Specifically in the areas in the mountains where you’re able to get short-term rental licenses. What we’re seeing is that demand is being concentrated into those areas which means that home prices will go up faster in those areas than they will in the areas where you can’t get a short-term rental license.

So what are my recommendations for buyers? My recommendation is that you buy sooner. Buy before the other buyers re-enter the market right now in the beginning of 2023. You can still find deals with sellers that listed in 2022 that haven’t been able to sell yet. But as we see buyers re-enter the market those deals are going to go away.

If you’re looking to sell in 2023 my recommendation is to talk to a realtor and do as much as you can to have your home ready to list as quickly as possible. That way we can react to any market shifts that we see. My recommendation would be to list in the peak market, which here in the mountains of Colorado tends to be early summer into August. By then we should see interest rates let up a bit and there’ll be more buyers back in the market. Regardless of whether you’re in an area with short-term rental licenses available or not, the difference between 2023 and past years is that as a seller it’s going to matter how well your home is marketed. If you’re in an area where you can get a short-term rental license we’re going to want to make sure that buyers absolutely know that and understand it. If your home is an area where you can’t get a short-term rental license we’re going to want to make sure that we market the other aspects of your home that a buyer would want to the fullest extent so that we can attract the most buyers possible. Unlike in past years, we’ve seen a bit of a shift in buyer mentality that I think is going to continue through 2023.

If you have other questions on the 2023 real estate market please feel free to reach out to me.