Credit Card Crunch Time

• Mortgage Rates¹ – We lost some ground this week and our benchmark rate climbed back up to 6.990% (7.067% APR).  There wasn’t any ‘big’ news this week, but Thursday’s initial jobless claims report, which measures individuals filing for first-time unemployment benefits, fell to 228,000 claims.  We were just starting to see initial claims above the 260,000 level and the market was expecting another rise in claims.  Unfortunately, strong economy = higher mortgage rates.

• Weekly Market Data² – We continue to see a slow but steady rise in inventory and now have 6,146 Active Listings, over half of which have been sitting on the market for over 30 days.  This is due in part to another solid week of new listings (with 1,248 homes hitting the market), and in part because only 268 (21%) went under contract within the first week.  This overall slowing of the market helped increase our median days on market to 9 days.  (Source: REColorado, all DMAR counties, this past week -Thursday to Wednesday).

• Columbine Team Insight – Looking back over the data we have collected, it is easy to see a shift that occurred after Memorial Day weekend when our acceptance rates stepped up – meaning that when our clients decided to make offers, they were accepted.  And with all else equal, it seems like that inflection point was when we started moving into a more balanced (and dare I say buyer-friendly) market environment.  This past week was no exception, with 80% of offers accepted.  While the types of opportunities certainly varied by house, and the accepted offers have been on average at or slightly above list price, our buyers do not seem to be struggling to get under contract.  We may well look back on this summer as a golden opportunity to buy before interest rates moderate and more intense competition returns.

• Market Trends –  No one is rejoicing at the current mortgage rates, which have been hovering in the 6% – 7% range for a year or so.  But do you know what is worse?  Try on a 24.52% interest rate for size.  Yes, that is the average credit card interest rate Forbes is reporting for the week of July 10th, 2023 – OUCH!  For those of you who already own a home and want to move, be sure to think about your overall cost of debt.  It may be comforting to simply roll all of your equity into the down payment on a new home, but if you are carrying high interest rate credit card debt, there are better uses for those funds.  Using some of the equity to pay-down or pay-off your credit card debt (and potentially other debt too) can open up additional monthly cash flow that you can use to ‘ladder down’ your debt load.  If you don’t currently own a home, be sure to weigh the cost/benefit of a lower down payment – maintaining a little extra liquidity and/or knocking down higher interest rate debt might be the better play.  Not sure exactly how that works?  No problem, just give me a call.

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 6.990%, and a P&I payment of $3,193.  The Annual Percentage Rate (APR) is 7.067% with a 0.064% discount fee ($307).  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 07/20/2023 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 07/13/2023 to 07/19/2023.   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.