Pretend you have been driving on the Interstate at 100 miles per hour.
Also, pretend you have been doing that for a long time.
Now pretend you slow down to 83 miles per hour.
How would that feel?
It would probably feel slow, right?
83 miles per hour is a 17% decrease from 100. It may feel slow, but it’s still pretty fast.
How does this relate to real estate?
Well, the market has been moving fast for a long time.
It’s been going 100 miles per hour for at least two years (some would argue even longer).
We’ve recently seen a 17% change in terms of number of transactions that are occurring.
There were 17% fewer sales in October 2018 versus October 2017 in Metro Denver.
It feels slow because we’ve been driving so fast for so long. But, our market is still moving.
For example, prices are still up. So, remember, that it’s all relative.
Here’s some good news for buyers who have been waiting for more selection…
No need to wait any more because the numbers show that more new listings are hitting the market compared to the recent past.
In Metro Denver, the number of homes for sale is up 14.42% compared to last year.
That equates to 800 more homes to choose from.
Start spreading the news!
Virtually all of the experts we follow put rates above 5% going into next year and some see rates approaching 5.5% by the middle of 2019. What’s certain is that there are economic forces at work that are pushing rates higher.
So, how about a little history lesson? How do today’s 30- year mortgage rates compare to this same date in history going all the way back to 1990?
• Today = 4.85%
• 2017 = 3.94%
• 2015 = 3.82%
• 2010 = 4.27%
• 2005 = 5.98%
• 2000 = 7.84%
• 1995 = 7.75%
• 1990 = 10.22%
While today’s rates feel high only because they are higher than 2017, they are quite a bit lower than at many times in history.
It’s true, certain parts of our market are cooling off. We are seeing fewer multiple offers, fewer bidding wars, and fewer inspection concessions.
However, homes that are priced right and in great condition are selling, and in many cases, selling quickly.
As buyers feel the market cool a bit, it may cause them to want to wait. They sometimes feel like it’s a better choice to ‘wait and see what happens.’
The reality is, there is a real cost to waiting given two specific facts.
1. Interest rates will continue to rise
2. Prices will continue to rise
Interest rates are a little more than 0.5% higher than a year ago and experts predict them to be another 0.5% higher by this time next year.
Prices have been appreciating at roughly 10% per year for the last four years. Based on the numbers, we see that appreciation could be 5% per year for the next two years.
So, let’s look at a house priced at $450,000 today. If prices go up “only” 5% for the next 12 months, that home will cost $22,500 more in a year.
And, if rates go up another half percent, the monthly payment will be $206 higher. That’s an 11% increase!
In an environment of rising prices and rising rates, there is a real cost to “wait and see.”