Getting Ahead of the Crowd

• Mortgage Rates¹ – Overall, rates moved up this week, climbing back into the 7%’s, even though our benchmark rate is only up slightly from last week to 7.000%.  The big news of the week came from the Federal Reserve meeting where they decided to increase the Fed Funds Rate by 25bps.  The markets anticipated this and markets didn’t move much in response to this news.  Markets were more interested in Chairman Powell’s comments at the post-meeting news conference where he indicated that they will ‘continue to monitor the data’ and left the door open for another rate increase in September (all data dependent, of course).  With that as a backdrop, when this week’s jobless claims and GDP data came in stronger than expected, interest rates came under pressure.

• Weekly Market Data² – We saw inventory increase only a smidge this week and now have 6,176 Active Listings on the market.  New listings dropped off a little, with only 1,099 new homes coming onto the market and nearly a quarter of those have already gone under contract.  Still, over half of the active inventory has been on the market for over 30 days, spelling opportunities for buyers looking to purchase and perhaps allowing for price negotiation, seller concessions, and inspection items. Median days on market remained at 9 days.  (Source: REColorado, all DMAR counties, this past week -Thursday to Wednesday).

• Columbine Team Insight – We saw a solid week for our clients, with another 80% of offers being accepted.  Less competition in the buyer pool continues to provide those looking to purchase with the chance to get into a home at or near list price and we are even seeing some seller concessions for temporary rate buydowns.  Although homes that are turn-key and located in prime locations are seeing some competition, it appears buyers who are patient can negotiate a “deal” in some form or another if the home has been on the market for an extended time.

• Market Trends –  It’s been nearly a year since rates broke through the 6% level, and with so many homeowners sitting on mortgages with a 3-handle, few are incentivized to move without a compelling reason (i.e. job change, expanding family size, etc.).  While the current rates aren’t particularly attractive, numerous buyers have opted to wait for rates to come back down, making the current market less competitive for those continuing their home search.  Our view was reinforced when  Robert Reffkin, CEO of Redfin, told CNBC in a recent interview that “The issue we are seeing is that we need to have an unlock of inventory.  It’s probably going to happen when mortgage rates get to 5% [or] 5.5% at a sustainable level. At that point, I would expect there to be a flood of inventory in the market, and it’ll feel like the pandemic craze all over again.”  I’m not one to time the market, but if/when rates hit those levels, I’d prefer to be refinancing my interest rate rather than trying to compete with those homeowners who have been anxious to move and now find themselves with excess equity that they can use to bid up prices.

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.