As we look back on the final numbers for December and reflect on 2021 as a whole, a few trends stick out. 2021 was a strong seller’s market. This was due in part to record-low inventory levels combined with a strong Colorado economy that drew young professionals and others to the state. 63,684 homes were purchased in 2021, more than any previous year even while new listings were down 5.26%.
December closed with a record low inventory, a measly 1,477 homes. We are starting the year with 41.87% fewer homes for sale than last year. This dramatic low inventory pushed the median home price up 19.78% from the close of 2020. This after increases of 17% (2020) and 16% (2019). Even with changes to interest rates and seasonal inventory increases on the horizon, we expect homes to continue to appreciate in 2022 based on reliable demand.
Projections for 2022
We expect low inventory to continue to be a theme in 2022. The low inventory at the close of December was likely compounded by seasonality, so it’s not yet time to panic. We expect to see inventory come back up sometime in mid-February and hopefully increase into the heat of summer. We don’t see buyer demand cooling with rental rates on the upward trend, but with any luck, new listings will distribute demand and give buyers a better chance.
When it comes to rates, lenders are projecting anywhere from a 0.5% – 1% rate increase before 2022 is over. If these projections hold true, buyers will start to feel a notable uptick around March or April. Colorado has had a faster economic recovery than most of the country, and the Fed makes rate increases based on the health of the whole nation’s economy, so these rate increases could get delayed again. This projected increase would still leave us with historically low rates, but it will make a noticeable impact on how far a buyer’s dollar can go. We suggest you connect with your lender to get a better idea of what this means for you.
Even with a rate increase, we expect appreciation to continue. We anticipate double-digit appreciation in parts of the city and surrounding areas. Property values will continue to be pushed upward by demand, low inventory and overall inflation. During the first COVID lockdowns, we didn’t see rental rates tracking with property values. We saw the start of a correction to this at the end of 2021 and expect it to continue.
The last few years have been full of uncertainty and unfortunately, the cloud of uncertainty follows us into 2022. All of these projections could be easily debunked in the next few months with a significant change to COVID numbers, the stock market, or that meteor from “Don’t Look Up”. For buyers, now is a great time to reconnect with your agent and your lender, so you are ready to pounce when more inventory enters the market. For sellers, now is the time to get up to date on recent comps in your neighborhood and discuss strategy with your agent. We are ready when you are!