The number of homes available for purchase in Colorado Springs and nearby areas increased last month for the first time in nearly 1½ years, but it's not yet a sign that the area's housing shortage is at an end.
In September, 1,184 single-family and patio homes were listed for sale in the Springs area, almost 19% more than the same month last year and the first year-over-year jump in supply since April 2020, according to the Pikes Peak Association of Realtors' latest market trends report.
The report tracks home sales whose transactions are handled by real estate agents and that take place mostly in El Paso County, along with a handful of Front Range counties.
I hope it's the beginning of a trend because we are so short of inventory and as we have been for quite a long time," said Bruce Betts, broker-owner of Re/Max Advantage, a Colorado Springs residential brokerage.
Only time will tell.
Colorado Springs, like many cities, has been plagued by shrinking numbers of homes for sale over the last few years.
In September 2020, the monthly supply of homes for sale totaled 996, the first time it had fallen below 1,000 in a quarter century, according to historical data maintained by The Gazette. The inventory continued to dwindle over the next several months and dropped to a record low of 460 in January of this year.
That tight supply of homes for sale and a furious demand for housing — driven, in large part, by historically low mortgage rates — have combined to send local prices skyrocketing.
This year, the area's median home sale price topped $400,000 for the first time and set record highs for five straight months starting in February.
In September, the median price of homes sold during the month was $440,000 — a 14.3% year-over-year increase, though down from the record of $450,000 that was set in June and tied in July and August, the Realtors Association report shows.
September home sales, meanwhile, totaled 1,758 or a 2.6% decline from the same month last year. Still, the number of homes sold in September ranked as the seventh highest monthly total over the last 25 years, Gazette historical data show.
Even as the supply of homes for sale climbed in September, it was being compared with a time last year during the height of the COVID-19 pandemic when many owners were holding on to their properties.
But in the four years before the pandemic, the supply of homes for sale in September of those years averaged a more normal total of nearly 2,282 or nearly twice as many as last month's inventory.
What does it all mean?
September's increase in inventory, while welcome, isn't enough to boost supply to the point where buyers will have so many more homes to choose from and prices therefore will fall because of greater competition among sellers, Betts said.
In fact, the number of homes for sale in September would last only about 20 days, based on the pace of recent home sales and if no more homes came on the market, the Realtors Association report showed.
"This is still not enough homes on the market," Betts said.
A spike in long-term mortgage rates, however, likely would lead to a significant increase in home supply and an accompanying drop in prices, Betts said.
Last week, 30-year, fixed rates averaged 3.01% nationally, according to mortgage buyer Freddie Mac. It was the first time long-term rates had risen above 3% since late June.
If rates were to rise to 5%, fewer buyers would be able to afford homes or, at least, qualify for the homes they'd want, Betts said. For example, buyers eyeing a $500,000 home with a 3%, 30-year loan would only be able to afford a $400,000 home with a 5% mortgage, he said.
A smaller pool of buyers who could afford pricier homes would mean a drop in sales, potentially greater numbers of homes sitting on the market and sellers who'd adjust their prices downward to attract buyers, he said.
"And others would then follow," Betts said. "If inventory increases dramatically then certainly prices are going to come down, because of the competition. As long as it's something that's desirable."
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