Interest rates

Colorado real estate market could slow with higher interest rates in 2022

The US central bank has announced that it will raise interest rates next year, which could curb the surge in Colorado’s real estate market.

Home prices have hit record highs across the state throughout the pandemic due to lower interest rates and a lack of homes for sale. The Federal Reserve recently signaled its intention to raise lending rates three times in 2022 in an attempt to stem inflation. This means that mortgage rates are likely to rise.

Higher interest rates are a double-edged sword for homebuyers: people have less purchasing power when rates rise. But at the same time, rising rates can curb uncontrollable price hikes, making housing more affordable.

According to Bret Weinstein, CEO and founder of real estate firm BSW Real Estate, one thing that isn’t expected to change anytime soon is the state’s demand for housing that far exceeds supply in the state market. The imbalance should keep prices relatively stable, he said.

There are many factors at play behind the shortage of homes for sale, including a slowdown in residential construction in the wake of the financial crisis and seniors choosing to stay put rather than downsize or move to communities of retirement. At the end of November, there were only 2,248 active listings in the Denver metro area, which includes Boulder, according to the Denver Metro Association of Realtors. This represents a 34% drop in inventories compared to the same period in 2020.

“I don’t think we are seeing a fall off a cliff at the end of 2022 where all of a sudden this housing market collapses,” Weinstein said. “But I think it’s very fair to say that we won’t see another two or three years of 16 to 20 percent appreciation.”

The median price of a single-family home in the Denver metro is $ 543,000, up more than 16% from a year ago.