Mortgage Rates1 – Unfortunately we lost ground this week and our benchmark rate climbed to 7.250% (APR 7.342%). There was not a lot of economic news to drive rates up; however, the few reports we did receive were not positive for mortgage rates. Retail sales in July were up 0.7%, which was stronger than the consensus expectations of 0.4%, and we received the Fed Minutes from their most recent meeting in which most committee members expressed concern about an upside inflation risk that could require more tightening. Unfortunately, inflation continues to put pressure on rates.
· Weekly Market Data2 – The other thing that continues to climb alongside interest rates is the Median Days-On-Market, which is now at 12 days. Buyers seem to be focused on summer vacation and are waiting on the sidelines – letting homes sit on the market for longer periods of time. Sellers, however, continued to list. We saw 1,093 new listings and a mere 19% of them (206 homes) went under contract in the first seven days. Total active listings increased to 6,540, providing buyers with the largest inventory of homes we’ve seen this year (Source: REColorado, all DMAR counties, this past week -Thursday to Wednesday).
· Columbine Team Insight – Not surprisingly, we also had a slow week with only a couple of offers going out and only one accepted (at list price). While aging listings tend to be a sign of potential negotiating opportunity, most sellers are not in a mindset where they are ready to concede large purchase price discounts. They may be more apt to reduce their listing price over time (on advice from their realtor, of course), but are always balancing their target price against their reasons for selling. Each situation is different, but we generally see offers that go out significantly below the current list price fail to even start a conversation, and rarely lead to a contract.
· Market Trends – It might feel a bit like finding a needle in a haystack, but if you are lucky and find a property that currently has a government loan such as a VA, FHA, or USDA loan, it is possible to assume their loan (and interest rate)! Now, keep in mind that it has been a very long time since the macro-environment was right for assumptions (and consequently, most loan servicers have limited experience processing assumption requests), but one of the key issues that needs to be addressed is ‘filling the financing gap’. Due to price appreciation and regular principal payments, the loan being assumed may not be large enough to fill the buyer’s financing need – and because you cannot increase the amount of the loan being assumed, a buyer might be forced to bring in a larger down payment than they originally anticipated. In this case, we have a solution in the form of a HELOC lender who will lend behind the assumable loan, with up to an 89.99% loan to value (10.01% down payment) and a line amount of up to $500k. So, if opportunity strikes just reach out and we’d be happy to help.
NOTES:
(1) The mortgage loan scenario presented assumes the purchase of a primary residence, excellent credit, an 80% loan-to-value (LTV), a loan amount of $480,000, a 30-year fixed interest rate of 7.250%, and a P&I payment of $3,274. The Annual Percentage Rate (APR) is 7.342% with a 0.168% discount fee ($806). Monthly principal and interest payments, which will continue for the stated term until paid in full, do not include mortgage insurance, property taxes or homeowners’ insurance premiums and actual monthly payments may be higher. Interest rates are current as of 08/17/2023 and are subject to change at any time without notice. All loans are subject to credit approval. Other terms and conditions may apply. Not all loans or products are available in all states. Regulated by the Colorado Department of Regulatory Agencies, Division of Real Estate.
(2) Source: REColorado®, Inc for the period 08/10/2023 to 08/16/2023. Data for Adams, Arapahoe, Boulder, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park counties. This representation is based in whole or in part on content supplied by REColorado®, Inc. and REColorado®, Inc. does not guarantee nor is it in any way responsible for its accuracy. Content maintained by REColorado®, Inc. may not reflect all real estate activity in the market.
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