December 17, 2024

As we wrap up 2024, the front range real estate landscape is finishing a year that was anything but dull. While the seasonal slowdown brought familiar patterns—rising days on market, increasing seller concessions, and more price reductions—there’s a deeper story under the surface. This year showcased the power of interest rates driving seller motivation and buyer sentiment.

Where We’ve Been in 2024:

Volatile Yet Steady: This year felt like the tale of two markets. On one hand, we had the highest inventory levels in over a decade, far surpassing the historically tight conditions of 2020–2022.

On the other, buyer activity—measured in showings—remained seasonally elevated, demonstrating that while buyers may have been hesitant, they didn’t walk away from the homebuying process.

Interest Rates as the Pivot Point: Mortgage interest rates hit a two-decade high just over a year ago before bouncing around for the next 12 months, at one point hitting a two-year low in September of this year.  

Even a modest half-point drop triggered notable buyer engagement, suggesting that many prospective buyers hovered at an emotional “tipping point,” ready to act if financing improved. Rates mostly remained in the 6% range, venturing as low as the low fives on certain types of loans for well-qualified borrowers.  Not enough to ignite a frenzy, but low enough to keep buyers engaged.

A More ‘Normal’ Seasonal Rhythm Returns: After years of pandemic-driven market distortions, we saw a return to more predictable seasonal behaviors. Prices drifted lower through year-end, days on market climbed past 60 days and continued to rise, seller concessions topped $8,000 per contract, and roughly half of all listings underwent price reductions. And as of mid-December, over three-quarters of properties are selling below their original asking price.

While that may feel like bad news to some sellers, it’s worth noting that these conditions are seasonally expected and will take a radical turn heading into the new year. 

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The Colorado Context: Why 2025 Looks Promising

Our state’s economic diversity, steady population dynamics, and an influx of wealthier out-of-state buyers are ingredients for Colorado remaining one of the most stable and attractive housing markets in the nation. While national housing policy, Federal Reserve moves, and ongoing global uncertainties will shape the broader economic and mortgage environment, local fundamentals remain strong.

As interest rates show signs of modest decline heading into later 2025, more homeowners—who’ve been locked in with super-low interest rates—are likely to enter the market, increasing listing volume. At the same time, any meaningful rate reduction will spur sidelined buyers into action, setting the stage for tremendous market activity.

2025 Forecast: More Action, Moderate Appreciation

Market Volume Increase: After two years of nearly identical, low-volume sales in 2023 and 2024—both about 20% lower than 2022 and 32.5% below 2021, and the lowest in 13 years—we anticipate an approximate 15% increase in home sales for 2025.

This activity growth will be driven by two primary factors:

1.        Population Growth: The regional population has grown by more than 18% over the last 13 years and the low level of real estate activity relative to population size is unsustainable. The market is poised to release pent-up supply and demand.

2.        Emotional Adaptation: Nearly three years ago, mortgage interest rates began a steep climb, starting in March of 2022. For almost two years, buyers and sellers mourned losing access to historically affordable mortgages. Anecdotally, many have now come to terms with today’s environment. As they move past lamenting what “once was,” we expect more people to buy and sell simply because real estate remains a key part of life’s evolution.

Home Value Growth: While 2024 ended with the expected seasonal slide of home values, prices across the front range were up approximately 4% year over year.  Analysis of the fundamentals suggest a 5–7% rate of appreciation over the course of 2025.

If Rates Drop Further: Should interest rates push even lower, say a half to three quarters rate drop, we could see a significant uptick in buyer activity. In that scenario, properties will move faster, with fewer price reductions, lighter concessions, and possibly multiple-offer conditions reemerging.  Prices could then rise substantially beyond the anticipated 5–7%.

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What This Means for Homeowners & Buyers

Current Homeowners:  If you held steady through 2024’s slower pace, expect your property’s value to continue its modest upward trajectory in 2025. While this likely won’t be a return to the double-digit appreciation of the pandemic years, sustainable growth is a healthy sign for long-term wealth building. If you’re considering selling next year, keep an eye on early-year rate movements and buyer activity and be prepared to make your property stand out from the competition to maximize its value.

Prospective Buyers: The window of negotiating power that existed in late 2024 will tighten moving into early spring if buyer demand increases as expected.  This coming spring, approximately 40% of homes will sell above the asking price and sellers will be less willing to negotiate terms like inspection repairs, rate buy-downs and other concessions.  The good news for buyers, they will be purchasing in a strong market of appreciation backed by sustainable fundamentals. 

Final Thoughts: The Colorado front range real estate market is finishing 2024 in a measured state—far calmer than the pandemic frenzy, recovered from the emotional turmoil of the rate climb of 2022 and volatility of 2023.  The market is underpinned by robust fundamentals of a diverse economy, population size that outweighs recent real estate participation and home supply of resale and new build homes that cannot keep up with demand.  2025 conditions appear poised for solid home value appreciation.