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Money at a Discount
This week, for the first time in 32 months, mortgage rates hit 4%.
While this increase may feel painful for buyers currently looking at property, it is important to put today’s rates in perspective.
We believe we will look back a few years from now and see that a 4% rate was like buying money at a discount.
Interest rates hovered between 4.5% and 3.75% for the 8-year span of June, 2011 to June 2018
Between January, 2000 and December, 2010 rates were as high as 8.25% and as low as 5.0%.
When looking at the history of interest rates and researching economists’ forecasts, we believe it is reasonable for rates to hit 5% within the next 24 months.
When interest rates increase 1%, a buyer’s monthly payment increases 10%.
So, if rates do go to 5%, it is like an additional 10% price increase for a buyer.
Given all of this information, we believe the biggest risk to a buyer in today’s market is to wait.
Mortgage rates are likely on their way up and there is an opportunity to buy money at a discount today.
Why List Now
Why does it make sense to list a home now? Shouldn’t I wait until the Spring?
These are legitimate questions we hear occasionally from our clients.
It turns out there are several good reasons to list a home in December or January instead of waiting for April or May.
The first reason is low competition. Today there are only:
- 279 homes for sale in Larimer County
- 263 homes for sale in Weld County
- 2,151 homes for sale in Metro Denver
So, a home on the market today has high odds of standing out in the market versus the higher-inventory market in the Spring.
In addition to lower competition:
- Buyers looking in the winter tend to be more serious and motivated by tighter timelines
- Interest rates will likely be higher in the Spring which will impact the purchasing power of Buyers, and consequently, the selling power of Sellers.
Want a house in Fort Collins? Grab $500,000, get in line and join the housing Hunger Games
“Buying a house in Fort Collins these days can feel like a combat sport. Maybe more like the
‘Hunger Games.’ Or Charlie Brown and the football — every time you get close to the ball,
Lucy whisks it away…”
Pat Ferrier at the Fort Collins Coloradoan breaks down the housing market in Northern Colorado with the help real estate professionals across the front range. Click the link below to read on!
Fort Collins real estate_ Average home price near $500K in market
Yes is the Answer
It turns out that ‘yes’ is the answer to the most common questions we hear right now about the market…
Do you think more properties will come on the market this Spring? Yes, the normal pattern in our market is for new listings to be 40% to 70% higher in April versus January. The peak month for new listings is typically June.
Do you think buyer demand will grow even more as time goes on? Yes, for two main reasons. Buyer activity, just like listing activity, increases significantly in the Spring and Summer. Plus, we expect the economy to open up even more as the COVID vaccine gets rolled out over the course of the year.
Do you think interest rates will go up? Yes, all of the trusted forecasters and economists expect rates to be slightly higher by the end of the year. Our own Chief Economist sees rates at 3.07% by year-end.
Do you think prices will keep rising? Yes, because of the simple economic forces of supply and demand. Supply is at historic lows. The number of properties for sale today is roughly 80% below the average. Demand is being fueled not only by the low-interest rates, but also a rebounding local job market that is poised to rebound even more. Plus, the new work-from-home dynamic positions the Front Range as a sought after place to live.
Job Bounce
“How could the real estate market be so strong in the middle of a pandemic?”
That is a fair question and one we hear frequently from our clients.
There are several reasons for this but two stand out.
- Interest rates
- Jobs
Employment has bounced back much quicker than most people expected. When COVID first showed up, the expectation was that many industries would be hit hard for a prolonged period of time.
The reality is that only a few industries were severely impacted by COVID and the rest were able to get back to a near-normal level of business relatively fast.
Additionally, what we find along the Front Range is that our ‘job bounce’ is even better than the national average.
Here are the numbers…
The COVID-peak unemployment rate for the Front Range looked like this:
- Larimer County = 11.1%
- Weld County = 10.1%
- Metro Denver = 12.3%
Today it looks like this:
- Larimer County = 5.2%
- Weld County = 5.2%
- Metro Denver = 6.4%
Nationally, unemployment peaked at 14.8% and now stands at 6.7%.
So, a main reason why demand is high now is because jobs have bounced back, and the bounce is even higher than the average across the country.
Rate Heading
Rate Heading
Where are interest rates headed?
This question was one of many which were addressed during our annual Market Forecast yesterday.
Our Chief Economist, Matthew Gardner, provided insight on rates, prices, inventory and many other fascinating topics.
Matthew’s prediction is for rates to creep up to 3.07% by the end of 2021. They are currently at 2.79%.
The image below shows how his prediction compares with predictions of his economist colleagues.
If you would like a recording of the presentation, simply reach out to your Windermere Broker or reply to this email.
Million Plussing
The luxury market is very active right now. Buyers in the high-end are taking advantage of low interest rates and the equity they have built in their prior homes.
Closings of million-plus single family homes are up significantly along the Front Range.
When compared to this same time last year, sales of properties in this price range are up:
- 87% in Metro Denver
- 150% in Larimer County
- 67% in Weld County
Windermere Real Estate in Colorado recently hosted a private online event for our clients with our very own Chief Economist Matthew Gardner. We would be happy to send you the recording if you would like.
6 Million
The National real estate market just hit a massive milestone.
Based on the numbers through August, we are now on pace to sell 6 million homes. This is the highest pace we have seen in 14 years.
The 6 million threshold is a big deal in the real estate brokerage world.
Each month, as they have for a long time, the National Association of Realtors tracks the sales and then calculates the annualized rate of residential closings.
For many, many years this number has bounced around 5.5 million. The fact that it just jumped to 6 million speaks to many factors especially the effect of today’s interest rates.
Rate Meaning
Mortgage interest rates have hit another record low this week.
Mortgage applications for purchases just hit an 11-year high.
Rates are at a level that many people could never have imagined.
Here’s something that is surprising to many people…
Rates are 1.5% lower than they were just two years ago.
Here’s what that means for buyers…
Pretend someone is looking at a $500,000 home and they will have a 20% down payment.
The difference in monthly payment is $320 between two years ago and today.
Obviously that is a significant amount of money.
Imagine what a person could do with $320 per month.
The fact that rates are at record lows is one of many reasons that the market is so strong right now and prices continue to appreciate at healthy levels.
Economist’s Perspective
Our Chief Economist made a video for all of our clients where he shares his perspective on COVID-19’s impact on housing. You can watch it by clicking the image below:
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