· Mortgage Rates1 – It was a relatively quiet week, with the ‘big’ news coming with Friday’s PCE inflation report. The report came in as expected with both PCE and Core PCE coming in at an annual rate of 2.6%. Still higher that Fed targets, but moving in the right direction. The reaction from the markets was somewhat muted, drifting against us over the course of the day. Our benchmark rate again remained flat at 6.875% (6.910% APR).
· Weekly Market Data2 – Another week of increasing active inventory has the market sitting at close to 9,750 active listings. With inventory normally peaking in the September timeframe, we are certainly on pace to move through the 10,000 mark before the end of the summer – something we haven’t seen since 2013. Median Days on Market widened a bit to 15 days. (Source REColorado, all DMAR counties, this past week – Thursday to Wednesday).
· Columbine Team Insight – We had 57% of offers accepted this past week as multiple buyers were either (a) unwilling to increase their offers due to competition or (b) offered significantly below asking and were not accepted. The offers that were accepted were at the contract price. We are also seeing buyers putting more demands on sellers with respect to inspection items… and terminating if they are rebuffed. While not yet technically in a “balanced” market, seeing 3 months of available inventory certainly feels more balanced than it has in years.
· Market Trends – We have been seeing a return of investment property buyers this spring as rates have stabilized and sellers continue to bring homes to market. While there are great options with conforming loan products when purchasing an investment property, this may not always be the best fit for investors with non-traditional or otherwise complicated sources of income. Luckily there is another option called a DSCR loan (Debt Service Coverage Ratio) which evaluates the cash flow of the property, rather than the borrower’s income for qualification. This can be very helpful if a borrower’s income is difficult to document, they are investing with partners, or they own multiple properties. For DSCR loans, the DSCR ratio is calculated by dividing the lesser of actual or fair market rent by the “PITIA” (principal + interest + taxes + property insurance + association dues). Essentially this is calculating the expected rents from the property divided by the mortgage carrying costs. A “DSCR ratio” of 1.00x suggests that the property is “breaking even” (e.g. the property revenue equals the property debt expense). A DSCR ratio above 1.00 means your property is cash flow positive before your management expenses. Financing options and rates vary depending on the DSCR ratio. Just reach out if you are interested in learning more about how you too can become an investor.
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 6.875%, and a P&I payment of $3,153. The Annual Percentage Rate (APR) is 6.910%, which reflects a discount fee of 0.124% ($595). 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 06/27/2024 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 06/20/2024 to 06/26/2024. 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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