Colorado’s Housing Market Affected by Historic Interest Rate Trends
The Colorado housing market is grappling with a significant challenge, primarily driven by a notable uptick in interest rates, something not witnessed in decades. The September housing sales report for the state, released by the Colorado Association of Realtors, underscores the complexities arising from higher mortgage interest rates during what is traditionally a slower season for home buying and selling. This impact is not confined to the Denver metropolitan area but extends statewide.
Sellers who choose to part ways with their lower-interest rate mortgages and enter the real estate market are offering more favorable terms to buyers compared to recent years. However, this situation presents a particular challenge for first-time homebuyers in Colorado, including those in the Denver metropolitan real estate market.
Matt Leprino, spokesperson for the Colorado Association of Realtors, highlights the current dynamics by stating that buyers now have the luxury of being more selective in their home search. They can afford to spend an entire weekend exploring properties without feeling the pressure to make an instantaneous decision, as seen in the past when multiple buyers competed for the same property. This situation is particularly advantageous for those with the financial capacity to do so or those with lower financing needs. In essence, the market is currently more favorable to such buyers than it has been in many years.
The average duration single-family homes remain on the market in Colorado has increased to 46 days, representing a 24% increase compared to the 37 days reported in September 2022. New single-family home listings in the state have witnessed a nearly 12% drop, with 9,416 properties entering the market, according to the Colorado Association of Realtors Market Trends Report.
The report also reveals that 5,402 single-family homes were sold across Colorado in September, marking a decline from the 6,975 sales reported in September 2022. After a slight decline earlier in the year in the statewide median home price, single-family home prices have risen by nearly 3%, reaching $575,000.
In the townhome and condo market across the state, the median sales price experienced a 2.6% increase, reaching $425,857. The Denver metro area reported a year-over-year rise in the single-family median home price, reaching 3% at $620,000. This uptrend in median sales prices in the metro area has persisted since August, following a downward trend in the preceding months of this year.
The report reveals that single-family homes spent 34 days on the market in the seven-county Denver metro area, representing a 17% increase compared to the previous year. The data indicates that despite fewer properties being listed, inventory levels are increasing. This situation is attributed to strong demand, with 14% fewer homes entering the market this September compared to the previous year, and 26% fewer than in 2021. Matt Leprino explains that this paradox is primarily driven by demand.
Amidst the challenge of higher interest rates, buyers seeking to mitigate their costs have a couple of options. One is to negotiate with sellers for an interest rate buy-down, which could potentially reduce monthly payments for a specified period, with the hope that interest rates will decrease. Another avenue is to explore assumable mortgages, where buyers take over VA or FHA loans with low-interest rates. However, this approach is often complex and may require secondary financing to cover the equity pay-off to the seller, potentially affecting the seller’s access to their VA or FHA benefit if someone else assumes the loan.
