Some of the most common things I’m hearing right now from home buyers and investors are “I want to hold off on buying a home until the market crashes.” Or “I don’t wanna buy a home if the market is just gonna crash next year.” or “When is the market going to crash so I can pick up some flips/rentals?”
As someone who was in real estate in Colorado Springs right after the market crash of 2008, here’s what I can tell you: Our market right now is DRASTICALLY different from that time, and we DO NOT have any of the conditions necessary for a crash.
Are we more balanced than we were during the COVID years? Yes. The market is not as insanely lopsided in favor of Sellers as it was from 2020-2022. Is it still a Seller’s Market? Also yes.
The COVID years had two distinct and unique market forces that were creating insanely favorable conditions for anybody who was trying to sell a home at that time:
1. Inventory was near zero. In El Paso County during COVID, at any given time we had between 130-250 active, existing (meaning not under construction) single-family listings. Which means we had about 10 DAYS worth of inventory. For comparison, in 2009, when I first started in Colorado Springs Real Estate, there were anywhere from 6,000-6,500 listings on the market at any given time. That translated to about 11 MONTHS’ worth of inventory. You couldn’t give away a house back then, and that’s part of why we had a crash…
2. The interest rates during the COVID years were basically free money. Interest rates in the 2-3% range made it the cheapest time in history to become a homeowner. And homeownership in the United States has historically been the easiest and most passive way to create wealth. Those interest rates created an entirely new group of potential homeowners, and demand for housing SOARED!
So why is the Colorado Springs real estate market NOW NOTgoing to crash?
Here’s a handful of reasons:
1. Inventory: We still do not have enough inventory to keep up with demand. As I’m typing this, we have 1,137 active, existing, single-family listings. Which is more than we’ve had since pre-COVID. In the last 30 days, we’ve had 921 existing single-family listings sell. Which means we have about 37 days’ worth of inventory. At this rate, we’d need about 5,500 active listings for the market to be BALANCED. This means we’d need closer to 10,000 active listings for the market to replicate the 2009 conditions and be considered crashing.
2. Foreclosures. In the early 2000s, subprime mortgages became the hottest thing on Wall Street. Without going into all the details, they became a hyper-commoditized asset class, and every mortgage lender and mortgage broker was pushing them to anybody who could fog a mirror and sign their name. People who had no business qualifying for ONE mortgage were getting loans on multiple properties that they really couldn’t afford. On top of THAT, negative amortization mortgages were introduced. Meaning a Buyer could get a mortgage at 7%, only make a payment based on a 2% interest rate, and have the remaining 5% be tacked onto the principal balance of their loan. It was essentially a kind of Ponzi scheme based on house prices ALWAYS going up. As soon as they stopped going up, a TON of people found themselves unable to make their payments, and we had a massive foreclosure crisis on our hands. Inventory shot through the roof with banks trying to sell their foreclosed properties to recover their losses.
3. Demand! The population in Colorado Springs has been growing at a steady pace for decades, and while the rate of population increase might be slowing a tad, it’s still growing and people are continuing to move here at a rate faster than we can build housing to accommodate them. So as long as demand outpaces supply and new builds, prices will continue to rise!
If you’re waiting for the Colorado Springs real estate market to crash before you buy your next home or investment property, you’re going to be sitting on the sidelines for a long time missing out on the equity gains you could be getting by getting in the game!
If you’re ready to buy or sell, click the link below to schedule a consultation call today!
