Phil Castle, The Business Times

Robert Bray doesn’t hesitate in identifying what he considers the biggest actor on the Mesa County real estate market.

“The interest rate has taken center stage,” says Bray, chief executive officer of Bray & Co. in Grand Junction. “It seems to me to be all about the rates.”

Annette Young, administrative coordinator at Heritage Title Co. in Grand Junction, agrees. A combination of higher interest rates and prices makes real estate less affordable and, in some cases, unaffordable. “It takes buyers out of the market.”

Real estate transactions and dollar volume in Mesa County dropped in December to half the levels of those recorded in the same, but far busier, month a year ago. Moreover, year-end numbers for 2022 came in well below the record-setting pace in 2021.

Real estate activity could remain slow in 2023 — what Young terms a “new neutral.” But with continued demand for housing and low unemployment, the market could turn around when interest rates relent. Bray says he expects a sluggish first half followed by a more robust second half.

Young said 271 real estate transactions worth a combined $141.6 million were reported in Mesa County in December. Compared to the same month a year ago, transactions declined 51.8 percent and dollar volume dropped 44.7 percent.

Fifteen large transactions with a total of $45.8 million helped bolster dollar volume, Young said. They included automotive dealerships and service centers at three locations in Grand Junction sold on one deed for $18 million. Commercial shopping units on 25 Road sold for $5.26 million, while a building on 12th Street that formerly housed an Albertson’s grocery store sold for $2.5 million.

The December numbers brought the year-end totals for 2022 to 4,722 transactions worth a total of $2.078 billion. Compared to 2021, transactions decreased 23.8 percent.

Dollar volume fell 11.9 percent despite higher prices because of record volume in 2021. Even so, 2022 volume also topped the previous peak of $1.73 billion in 2009.

The single-year record for real estate transactions remains intact at 7,198 in 2005.

According to numbers Bray & Co. tracks for the residential Market in Mesa County, 173 transactions worth a total of more than $64.3 million were reported in December. Compared to the same month a year ago, transactions declined nearly 50.9 percent and dollar volume decreased 44.8 percent.

Bray says the changes were dramatic and somewhat reminiscent of what happened in Western Colorado in the aftermath of the oil shale bust in the 1980s, although that decline was deep and prolonged.

The December numbers brought the year-end totals for 2022 to 3,257 transactions worth a total of nearly $1.4 billion. Compared to 2021, transactions decreased 21.4 percent and dollar volume fell nearly 9.3 percent.

Bray attributes the slowing to an increase in mortgage interest rates that peaked at 7.5 percent, but since have moderated to around 6.4 percent for 30-year mortgages and 5.7 percent for 15-year mortgages.

Home prices continue to appreciate, but at what could be a slowing pace, he says.

The median prices of homes sold in Mesa County in 2022 climbed to $385,000, up 16.7 percent from 2021. Between December 2022 and December 2021, however, the median price was up 5.6 percent to $370,000.

One result of slowing in real estate activity has been an increase in inventory, Bray says.

At the end of December, there were 523 active listings in Mesa County. That’s more than double the 219 listings at the same time last year and a gain that offers buyers more selection.

New home construction continues to lag, he says, as higher interest rates and growing uncertainty slow building. For 2022, 720 building permits for single family homes were issued in Mesa County. That’s down 21 percent from 2021.

Even with more inventory, housing stocks lag behind what’s needed, he says.

As for 2023, Bray says he remains optimistic because slowing is related more to higher interest rates than higher unemployment rates. “It’s not unemployment induced.”

Moreover, demand for housing remains strong, he says.

After what she described as a roller coaster ride in 2022 in which the year started strong and then activity dropped when interest rates spiked, Young says she expects the market to remain at 2020 levels in 2023. “I think we’re going to see this new neutral.”

Bray says he expects a “soft landing” with efforts to raise interest rates to curb inflation without sending the economy into a serious recession. Once interest rates come back down — perhaps by the middle of the year — he expects the real estate market to rebound.

Meanwhile, property foreclosure activity continues to increase, Young says.

For 2022, 241 foreclosing filings and 45 foreclosure sales were reported in Mesa County. That contrasts with 27 filings and 21 sales in 2021.

Young says foreclosure activity could increase further, but doesn’t consider the numbers alarming.