Pueblo’s real estate market is still red-hot, as median home prices continue to climb, but there are a few signs that it could be losing steam.

Fewer homes were sold this April compared to last, some sellers are reducing prices if their homes don't sell fast, and there has been a slight slowdown in the number of showings realtors are booking.

Although 14 fewer homes were sold this April compared to last, the revenue those homes brought in went up by more than $10 million, a 13% increase. In April 2021, 289 homes sold for $81.3 million and this year, 275 homes sold for $91.1 million.

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In April, 386 homes went on the market, up 24.2% when compared to April 2021. Overall, new listings are up 12.9% year-to-date when compared to 2021.

“You are seeing people putting homes on the market and the number of homes under contract are high,” said Dave Anderson, Pueblo Association of Realtors' number cruncher. “But we are seeing some price reductions and some of them are not small - $5,000 to $10,000.”

“I am thinking that’s because sellers are expecting the homes to sell fast and if that doesn’t happen, they are lowering their price right away,” Anderson explained.

Still, the statistics show that sellers are receiving 104% of list price which indicates some bidding wars are continuing.

In terms of showings slowing down, “Part of that is frustration of buyers tired of not getting anything, graduations and then of course the interest rates have gone up,” Anderson said.

Median home prices and interest rates continue to rise

Single family median home prices went up from $310,000 in March to $318,000 in April, pushing some prospective buyers out of the market.

“With the rise of interest rates and the price of the homes here in Pueblo, it’s forcing a handful of buyers out of the market because they simply cannot qualify like they once did, especially when it's a family of four or five people needing accommodating bedrooms, bathrooms and square footage,” said Ed Posa Jr., loan consultant for Caliber Home Loans’ Pueblo office.

“I believe this combined with other factors is a necessary evil that will become the pivot point to the market changing from a seller’s market to a buyer’s market eventually," Posa Jr. said.

Because first time home buyers don’t have equity in another property to roll into a new home, they “are at the mercy of what they can save, be gifted from relatives or withdraw (and pay taxes on) from retirement plans,” Posa Jr. said.

Combined with the current economic situation, where inflation is a factor, first-time home buyers are facing an unfortunate scenario, he explained.

Posa Jr. said he uses the Colorado Housing and Finance Authority’s down payment assistance program as a gauge to the current market conditions and to measure interest rate behavior. Because everyone who qualifies for a Colorado Housing and Finance Authority down payment assistance program is offered the same rate, it generalizes the current and historic atmosphere of the market, he said.

Interest rates dropped from 4.5% in January 2020 to 3.25% in July 2020. So far this year, the rate has increased from 3.375% in January to 4.375% in February, and then to the current 5.5% interest rate.

"What this has done is disqualified a lot of borrowers who had close debt-to-income ratios to begin with and it has pushed them out of the market to purchase altogether. I’ve seen a lot of rates in the high 4% to mid 5% range depending on the buyers' credit score and other qualifying factors," Posa Jr. said.

The highest number of homes – 76 – sold in April in the $300,000 to $399,000 price range. Buyers were able to obtain 107 conventional loans, 78 Federal Housing Administration loans and 33 Veterans Administration loans.

A total of 45 buyers paid cash.

The Federal Housing Administration loans offer more flexible debt-to-income ratios, causing many Puebloans the need to use the program. Veterans Administration loans also have flexible ratios and 100% financing for qualified veterans.

New home construction not keeping pace with demand

New home construction is not keeping up with demand in the real estate market, but Anderson said he expects that will change this month.

“Only seven building permits were pulled in Pueblo West in April," Anderson said. “There still is lots of land in Pueblo West to buy and build on.”

Pueblo West building slowed when the metro district had a temporary halt on new building Jan. 24 through April 12 to assess water supply in the face of explosive growth. Since April 12, the district began taking up to five applications for water taps per builder.

Pueblo West will sell 400 water taps for the remainder of the year on top of 98 taps that were sold prior to the temporary pause. Out of 35 permits pulled for Pueblo County in April 2022, only seven were for Pueblo West, and 28 for builds mostly in Pueblo city limits.

“That is one of the lower monthly building permit totals in quite some time,” Anderson said.

A few builders are obtaining permits to build in the Sawyer Ridge area on Pueblo’s north side, Anderson said. “It’s’ been there probably 20 years, but they just opened up another area.”

Posa Jr. said as clients look to build new homes, he works to offer longer term rate locks of up to a year, “which are extremely valuable to avoid the inevitable volatility of the real estate market.”

Although he said he doesn’t have a crystal ball, “I would not be surprised to see rates in the mid-6% range or higher by the end of this year.”

“I would advise all buyers and sellers or those thinking about buying or selling to educate themselves by reaching out to us local professionals. Don’t be afraid to ask questions or have your specific situation analyzed,” Posa Jr. said.

Real estate trends: Pueblo median home price soars again as demand for housing continues to outpace supply

Chieftain reporter Tracy Harmon covers business news. She can be reached by email at tharmon@chieftain.com or via Twitter at twitter.com/tracywumps.

This article originally appeared on The Pueblo Chieftain: Pueblo's real estate market shows signs of slowing