· Mortgage Rates1 – Well it has been another “fun” week in mortgage land as the market absorbed the various labor reports that were released. We kicked off the week on Tuesday with the August JOLTS report, which showed job openings increasing from 8.92M to 9.61M, not good news because it indicated companies were hiring. However, on Wednesday we received the ADP Employment report, which came in substantially below expectations at only 89,000 jobs created (versus expectations of 153,000), helping our benchmark rate recover, but still ending up at 7.625% (APR 7.740%). It turns out that improvement was temporary, as the BLS Jobs report this morning showed there was an increase of 336,000 jobs in the month of September (versus expectations of 170,000). Buckle in.
· Weekly Market Data2 – We saw our first decline in Active listings this week since mid-March to 7,260 homes, which most likely indicates we have hit our peak for the year. The decline was minimal, but it is typical to see inventory start declining in the fall. Part of the decline was due to the 971 closings we saw last week, which is substantial and pushed our Median Days on Market down to 17 days. There were also 983 new listings, of which 15% went under contract in the first week. As both the temperatures and the markets start to cool this fall, homes will sit longer, opening up opportunities. (Source REColorado, all DMAR counties, this past week -Thursday to Wednesday).
· Columbine Team Insight – We had an active week with 100% of offers being accepted, most of which included seller concessions or were below list price. Only one offer faced competition, forcing the purchase price over list by 3%. Overall, accepted offers were 1% below the list price. Whenever we start to see 100% of offers being accepted at below-list price there is the opportunity for buyers to take advantage of the shift in competition. Seller concessions and price reductions can help alleviate the impact of higher mortgage rates and the ability to get the home you want is priceless!
· Market Trends – We often get asked if it makes sense to buy now or to wait until rates are lower. Besides the increase in competition lower rates will bring, there is also a real cost to waiting that we can quantify – and it’s probably not as much as you might think. Let’s take our benchmark scenario of a $600k home purchase at a 7.625% rate, but say you only have 5% to put down like many first-time homebuyers. You will pay about $45,500 in interest and mortgage insurance in the first year. Now assume you can buy the same house in a year’s time for the same price (this assumes no appreciation and the same level of competition – both of which are unlikely) at an interest rate of 6.625%. The lower interest rate works out to a difference of a little less than $6k over the course of the year, and don’t forget we can refinance too if rates move down. Is the extra $6k worth losing out on a fantastic home today and hanging out on the rental hamster wheel?
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 7.625%, and a P&I payment of $3,397. The Annual Percentage Rate (APR) is 7.740% with a 0.073% lender credit ($350). 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 10/05/2023 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 09/28/2023 to 10/04/2023. 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.
Recent Comments