The new year looked a lot like the old year last month for the Colorado Springs-area housing market, as the pace of buying and selling slumped again and prices remained relatively stable.

Even so, some local real estate agents are optimistic that the market is poised to rebound in 2024 as long-term mortgage rates decline.

“We’re starting to see an improvement on showings, under contracts and things like that,” said Chris Lutyen, managing broker of Coldwell Banker Realty in Colorado Springs. “I feel like the market is heating up. I’m not saying that it’s going crazy or anything, but I feel like we’re going to have a much better year this year than we did last year.”

Home sales in January totaled just 668, a 9.6% drop from the same month a year ago and the fewest since 636 sales in January 2015, according to a report this week by the Pikes Peak Association of Realtors and historical data maintained by The Gazette. Sales also have declined for 20 straight months on a year-over-year basis.

Not only did sales fall, but it’s taking longer for properties to find takers. Homes spent an average of 54 days on the market before selling, compared with 50 days during January 2023, the Realtors Association report shows.

Of Springs-area homes that were sold in January, and whose transactions were handled by area real estate agents, the median price of those properties rose to $450,000, a 1.1% increase compared with the same month last year. Prices now have climbed for five consecutive months on a year-over-year basis, though the recent uptick followed seven months of declines.

The local housing market, like that of many cities nationwide, did an about-face when mortgage rates began to surge in 2022.

Until that time, historically low rates of 3% or less for 30-year mortgages fueled a furious demand for housing starting around 2018 and peaking in 2021 and early 2022. That demand, combined with a shortage of properties for sale, led to bidding wars among buyers, multiple offers fielded by sellers and soaring prices.

But after the Federal Reserve began to increase interest rates in late spring 2022, and mortgage rates also began to rise, the demand for housing slowed dramatically in the Springs and elsewhere and sales waned.

By the end of 2022, long-term mortgage rates had doubled to more than 6%, according to mortgage buyer Freddie Mac.

In 2023, rates dipped to start the year, but later resumed their ascent and topped 7% from mid August to early December, Freddie Mac figures show. Since then, rates have eased somewhat; they stood at 6.63% on Thursday for a 30-year, fixed-rate loan, according to Freddie Mac.

“There was a lot of shock and awe last year over the interest rates,” Lutyen said. “They’ve adjusted down a little bit, which is good.”

Now that the Federal Reserve decided this week to leave interest rates unchanged and inflation appears to have improved, Lutyen said he expects more sellers to list their homes and more buyers to jump into the market.

One positive sign: the inventory of homes for sale at the end of January rose to 1,749, up 6.7% on a year-over-year basis and the first increase in supply since May, the Realtors Association report showed.

“People are starting to get used to the rates,” Lutyen said. “That was part of the challenge last year; it was such a shock to be in the 7s and even at 8%, versus the 2% and the 3% that we had been used to for quite a while.”

As rates fall and perhaps even dip to 5%, activity will pick up, Lutyen said.

“If the rate were to come down to 5%, we’re going to have, once again, multiple offers and things of that nature,” he said. “The savvy buyers are making good decisions by saying, you know what, let’s get into the market today, not really be in a competition and pick out what we want.”

Once buying and selling picks up, expect prices to climb, too, Lutyen said. He forecasts an 8% appreciation in prices this year, though he also expects the supply of homes on the market to increase, which will give buyers more choice and temper price hikes.

“I don’t think we’ll get carried away like we had in 2020 and ’21. It’s a good market and it’s a good number,” he said of his 8% prediction on prices. “But I still don’t think it will get crazy-crazy.”

Colorado Springs-area home sales fell by 9.6% on a year-over-year basis in January, the 20th consecutive month of declining sales and the fewest for any month in nine years. Some real estate agents, however, say falling mortgage rates will lead to a market rebound in 2024.

THE GAZETTE FILE