What is typically the hottest time of the year for the housing market is seeing a slowdown, with a growing inventory of Colorado real estate taking longer to sell. 

The trend has persisted since last year as the market continues to cool down from a buying frenzy that was particularly apparent in mountain resort areas during the first years of the COVID-19 pandemic. 

Now, with the highest interest rates in more than two decades compounding other cost pressures like homeowners insurance and HOA dues, more buyers are sitting on the sidelines. 

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“On a national level, 2023 was the worst year for existing home sales since 1995,” said Colorado Association of Realtors President-elect Dana Cottrell. “Even worse than the Great Recession.” 

The number of home transactions in Colorado continued to flatten this June and July, months that historically see some of the most activity. In several mountain resort communities, the average number of days on market for a listing has increased from last year, according to county-level reports from the Realtors association. 

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Now, sellers are making more concessions to seal the deal with buyers. 

Of the 14,651 transactions that occurred statewide from May 8 to Aug. 8, 56% came with a concession, according to data from REColorado that was part of a recent presentation shared by Cottrell. 

The percentage of transactions with concessions varied widely in mountain areas, with 27% in Eagle County to 100% in Routt County, for example. Real estate experts added that because of the small number of sales that typically occur in these markets, a single sale can dramatically change the data. 

Examples of buyer concessions include interest rate buydowns, prepaid HOA dues and covering a buyer’s closing costs. Cottrell said sellers have generally been more reluctant to lower their asking price since concessions can save more upfront costs for buyers. 

She pointed to HOA fees as an example. If a seller is willing to prepay a year’s worth of fees at $1,000 a month, that translates to $12,000 of immediate savings. By contrast, shaving $12,000 off a home’s price would be baked into a mortgage, meaning buyers probably would see that impact over a 30-year period. 

“It doesn’t feel like a big savings,” Cottrell said.

HOA fees remain a sticking point for prospective buyers who, in some cases, could face monthly dues that rival even their mortgage payments. Driven by an explosion in homeowners insurance premiums in recent years, the fees have created headaches for current homeowners and prompted legislative review by state lawmakers. 

But that’s just one factor in today’s market that could be behind the buying slowdown. Interest rates, which dictate everything from mortgages to credit card payments, remain at a 23-year high. 

Mortgage rates have begun to come down in anticipation of the Federal Reserve’s expected interest rate cut in September. But any initial cuts will still keep mortgages higher than what most homeowners — who are locked into mortgages from when rates were lower — are currently paying. 

“People are still really loving their low mortgage rate, so we’re not seeing that (housing) turnover,” Cottrell said. “We believe once the interest rates really start to drop, there should be pretty pent up demand.”

Even amid the buying slowdown, Colorado’s resort communities remain partially insulated due to a unique buyer pool that includes second-home owners and a large percentage of cash buyers. 

Vail-area Realtor Mike Budd said in June, 68% of all transactions in Eagle County were $1 million and above, “which has been a trend that’s been evolving for really the last year and a half.”

Steamboat-area Realtor Marci Valicent said the resort area is seeing “a lot more higher-end buyers coming to Steamboat than we ever have before.”

For those reasons, basic economic principles of supply and demand have not played out the same way in mountain communities as with other parts of the state. Despite more inventory in some rural resort counties, home prices remain high. 

Part of that could be attributed to a lack of multifamily housing — homes that more often are sold below $1 million. As Valicenti put it, “While the number of inventory looks like it’s substantially more, it’s still very limited. We are really, I’d say, lagging on multifamily developments.”

And while insurance rate cuts could take some of the pressure off buyers on the lower-end of the market, Budd questioned if rising homeowners insurance premiums “could negate a lot of the value of a mortgage rate decline.”

“Everyone’s kind of waiting with baited breath,” Budd said.