Phil Castle, Business Times

Real estate activity continues to slow in Mesa County as a combination of higher interest rates and prices make homes less affordable for prospective buyers.

The story of the local market has changed, said Robert Bray, as mortgage interest rates and residential inventories have reversed roles. In nearly doubling, interest rates have gone from hero to villain. What were low inventories have nearly doubled, becoming something of a hero in offering more selection.

“Those two characters have switched places,” said Bray, chief executive officer of Bray & Co. Real Estate in Grand Junction.

Annette Young, administrative coordinator at Heritage Title Co. in Grand Junction, said there’s still an unfilled need for housing. But until interest rates and prices moderate, sales will slow. “The demand is still there, though. But, obviously, it’s got to be affordable.”

Young said 256 real estate transactions worth a combined $110.3 million were reported in Mesa County in November. Compared to the same month last year, transactions declined 41.8 percent and dollar volume dropped 35.1 percent. Those were some of the biggest year-over-year proportional declines since the Great Recession in 2008 and 2009, she said.

Eight large transactions accounted for a total of $17.6 million in November 2022, Young said. They included the sale of Monument Ridge Apartments on B 1/2 Road for $6 million, a medical office building on Wellington Avenue for $3.65 million and an industrial office building on River Road for $1.63 million.

Through the 11 months of 2022, 4,451 transactions worth a total of more than $1.9 billion were reported, Young said. Compared to the same span in 2021, transactions decreased 21 percent and dollar volume fell 7.9 percent.

Young said rising prices have long made homes less affordable, but even more so recently because of higher mortgage interest rates. “Now you’ve added that on top of it.”

According to numbers Bray & Co. tracks for the residential market in Mesa County, 181 transactions worth a total of nearly $76.6 million were reported in November. Compared to the same month last year, transactions fell 43.3 percent and dollar volume declined 40.1 percent.

Through 11 months of 2022, 3,076 transactions worth a total of more than $1.3 billion were reported. Compared to the same span in 2021, transactions decreased 18.8 percent and dollar volume retreated 5.9 percent.

The effects of an increase in mortgage interest rates from 3 percent to more than 6 percent have been dramatic, Bray said.

Home prices continue to increase. The median price of homes sold through 11 months of 2022 increased 16.7 percent to $385,000 compared to the same span in 2021. Bray expects the pace of appreciation to change, however. “It’s got to start slowing.”

One indicator could be a decline in the proportion of homes sales in which the sellers received list price — 97.3 percent in November compared to 98.8 percent the same month last year.

One result of slowing activity has been an increase in residential inventory. At the end of November, there were 586 active listings in Mesa County. That’s an increase of nearly 90 percent from a year ago that offers more selection to buyers, Bray said.

New home construction continues to lag, however, in part because of growing uncertainty among builders and the bankers who lend them money, Bray said. Through 11 months of 2022, 682 permits for single-family homes were issued in Mesa County. That’s down 21 percent from the same span in 2021.

Bray and Young both said they expect the market to rebound when interest rates and prices moderate. But that might not occur for another six months to a year or more.

Property foreclosure activity continues to increase, Young said. Through 11 month of 2022, 226 foreclosure filings and 44 sales were reported. That contrasts with 25 filings and 18 sales for the same span in 2021. Foreclosure activity could increase further as more loans come out of forbearance, but Young said she doesn’t consider the numbers alarming.