· Mortgage Rates1 – The week’s most anticipated news was the Federal Reserve’s decision to hold the benchmark rate between 5.25% and 5.50%. It was a broadly anticipated decision given data for employment is beginning to show softening and the core inflation is continuing to cool. What was not anticipated was the Fed’s dot plot chart changes that show the participating Fed member’s expectations for the direction of rates in the future. The revised chart shows an increase one more time this year and 2 rate decreases next year (down from 4 decreases on previous dot plot charts), ultimately leaving the Fed Funds Rate 0.5% higher at the end of 2024 than previously projected. Fed Chairman Powell reiterated that their mission is to restore price stability and that future decisions (as have all past decisions) will “depend on the totality of data.” The market reacted unfavorably to these changes and our benchmark rate ticked up a bit and we are now sitting at 7.375% (APR 7.465%).
· Weekly Market Data2 – We had another steady week of inventory gain in the Denver Metro area! We had 1,066 new listings come on to the market, which brought our active listings up to 7,231. Of the active inventory, about 60% of the listings have been on the market for more than 30 days. Of the new listings, only 15% of them went under contract this first week, inching up the inventory for less than 30 days by only 57 homes. As homes appear to be sitting a little longer on the market before going under contract, our median days on market has ticked up to 13 days. (Source REColorado, all DMAR counties, this past week -Thursday to Wednesday).
· Columbine Team Insight – This week we saw 50% of the offers that went out get accepted. Of those accepted all were at list price and we saw a nice seller concession as well. With demand from buyers down (due to higher rates) and the growth in inventory, the market continues to shift to a more balanced market. From this shift we see buyers in a better position to negotiate, whether on price, inspections items, seller concessions or all of the above! There are still some well priced, move-in-ready gems that are getting snatched up quickly and may even see multiple offers, but homes that have been on the market for more than that first week spells opportunity for buyers.
· Market Trends – Last week the number of active listings grew by over 9,000 homes nationally, the largest inventory increase in a week – all year! As new pending sales are also down nationally (10% lower than this time last year), demand from buyers appears to be waning. A change in expectations around rates has drawn many buyers out of the market. Their beliefs about the trajectory of rates have changed and many believe rates may be moving higher, not lower, as many had previously thought. For the few buyers who are continuing their home search, their increased negotiating power (due to more supply and less demand) opens the door to ask for seller concessions – including for a Temporary Rate Buydown. There are many versions of this loan option out there and can range from 1-3 years of short-term payment reductions. A popular version is the 2-1 Buydown which, assuming a current rate in the 7’s, would effectively reduce the rate for the first year to something in the 5% range! Time to dust off this tool as we roll into the end of the year – it gives sellers a way to offer out-sized concessions without lowering their purchase price – making a big difference in buyers’ cash out of pocket over the short term.
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 7.375%, and a P&I payment of $3,315. The Annual Percentage Rate (APR) is 7.465% with a 0.272% discount fee ($1,306). 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 09/21/2023 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 09/14/2023 to 09/20/2023. 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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