Higher interest rates harmed homebuyers’ spending abilities in 2022 leading to fewer homes sold in Durango and La Plata County. At the same time, high appreciation values elevated median home prices.
Reports from the Durango Area Association of Realtors show interest rates began rising in March and continued through November when they eventually leveled off around 6% to 7%. Interest rates in 2021 were as low 2.7% in January 2021.
“Anytime those interest rates go up, then people have less buying power,” said Lois Surmi, managing broker at R1 Colorado.
The number of La Plata County homes sold last year decreased by 330 units compared with 1,390 units sold in 2021. The number of Durango in-town homes sold last year decreased by 42 units compared with 181 units in 2021.
Median home prices shot up in 2022 with in-town Durango home prices increasing from $650,000 in 2021 to $760,000 in 2022. Durango country homes also saw a massive increase going from a median price of $685,000 to $775,000 in 2022.
“The demand to live in Durango is going to keep it desirable, that will keep the prices up somewhat,” Surmi said. “But what we were seeing was a pretty unhealthy increase in appreciation for a couple of solid years there, and it has to stop at some point.”
Data from the 2023 Southwest Economic Outlook shows that La Plata County Housing appreciation values were at 2.2% before March 2020 and shot up to 42.2% after March 2020.
Surmi said she’s still seeing appreciation values in the 20% range, and if those decrease over the course of the year, then the market will look better for homebuyers. A healthy appreciation value is considered around 4%, according to the National Association of Realtors.
The only area that saw a median home price decrease was Durango mountain condos and townhomes, which went from $485,000 to $440,000, which is over a 9% decrease.
Because condos vary in price, the median price can often fluctuate based on the number of affordable or expensive condos sold.
Bayfield home prices, which is often considered a cheaper area to buy homes in La Plata County, also saw hefty increases in home prices in 2022.
Bayfield in-town homes increased from $399,000 to $463,750 in 2022 while Bayfield country home prices escalated by over $100,000 going from $444,000 to $545,500.
However, the number of Bayfield in-town homes sold did not change much, decreasing from 65 to 62 units sold in 2022. The number of Bayfield country homes sold had a slightly higher decrease falling from 141 in 2021 to 121 in 2022.
Throughout 2022, a lack of housing inventory was a consistent problem along with increased interest rates and less spending power.
Surmi said Durango is different from the typical real estate market because a lot of people want to live in town but it lacks a large industry to attract workers. She said the demographic that wants to move to Durango generally has the spending ability to afford higher interest rates.
She also said many homebuyers are searching for homes in the $300,000 to $400,000 range. Because of a lack of listings in that range as well as higher interest rates, fewer people are looking to purchase homes.
The median price for Durango mountain homes went up by 48% in 2022. The median price was $1.1 million in 2021 and $1.7 million in 2022. Fifteen fewer homes sold in that area in 2022 compared to 2021.
Surmi expects the number of units sold to slow down immensely during the later winter and early spring months.
“People don't typically list heavily during this part of the year,” Surmi said. “Most people say when the spring gets better, and my flowers look great, and the front of my house looks wonderful, that’s when I’ll list.”
Surmi said if interest rates begin to fall by the second quarter of 2023, the market will start seeing higher activity.
Durango Area Association of Realtors predicts that year-over-year home appreciation rates will continue to increase in 2023 but not at the rapid rate they had in 2020.
Surmi said its likely there won’t be a significant drop in median home prices in 2023 and that the numbers are likely to look similar to 2022.
tbrown@durangoherald.com
