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Interest Rates and the Housing Market: How Have Things Changed?

Interest Rates and the Housing Market: How Have Things Changed?

September 08, 2022
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Whether you're thinking of buying, or selling, or just want to keep tabs on the changing landscape in the housing world, here are is what two Denver area specialists are seeing out there now:  

The Housing Market: A Glimpse at This Summers Changes in the Denver Metro Area 

July metrics started to show a market that has shifted. Demand in the Denver Metro Area has dipped due to high prices and rising interest rates. As a result, prices have stabilized, and homes are staying on the market a bit longer. While there might be quite a bit of uncertainty in the Denver housing market right now with home sellers and home buyers adjusting to new realities, the good news is that Colorado’s economy is strong.

Home prices remain high and inventory levels remain limited, which keeps sellers in a great position. In July, the median price of homes was 11% higher than last year but down from the 20% increase in value a year ago.

The days of feverish demand are in the rearview mirror as buyers reevaluate their home buying goals given today’s home prices and higher interest rates. According to REcolorado metrics, July saw a decrease in the number of closings as compared to both the previous month and last year. Buyers may even be backing out of contracts as a result of market conditions. 

Bottom Line…. It still remains a good time to buy even as interest rates hover at 5%.  With more inventory coming onto the market, the frenzy of multiple offers starts to diminish but it's still a seller’s market and offers must be competitive to be successful.  Whether you're buying or selling, the key is to work with someone you trust to help you navigate your "next home" journey. 

(Contributed by Kathy Boyle, Real Estate Relocation Specialist at https://katchencompany.com/)

Interest Rates: Here are four things that can become more expensive now that the Federal Reserve has begun raising rates

  1. Credit Cards. With the Feds rates increase, your credit card annual percentage will most likely increase over the next few months.  
  1. Heloc (Home Equity Lines of Credit) and Personal Loans. These types of loans typically are based on prime rate and will be impacted by the Fed Increase in rates.
  1. Car Loans. This won’t affect borrowers already locked into a rate, but new car loans or those with variable-rate will likely see an increase is cost.
  1. Private Student Loans. Borrowers with private, variable-rate loans could see an increase in how much they pay in interest. 

What about Mortgage rates?  There is a common misconception that the Fed sets mortgage rates.   That's not actually the case, the Fed meets 8 times a year to discuss something called monetary policy.   They are responsible for the Fed Funds Rate, so, the fed decides what the shortest-term loans will cost.  The Market decides what longer term loans (like mortgages) will cost.   The only exception to this is any mortgage that is based on the PRIME rate,  i.e., an adjustable-rate mortgage. The market does however tend to 'react' to what the Fed says and, in the end, can absolutely have an impact on longer-term rates.  “Futures” are something that can typically price-in the Fed rates hikes before they even happen, so it is not uncommon to see mortgage rates move in opposite direction of the Fed for a short amount of time.

So in the end, Mortgage rates are influenced by the market and set a par rate. However, there are other factors that can also affect your interest rate.  These include your credit score, price point,  loan amount, down payment, loan term, interest rate type and loan type.

(Contributed by LeAnne Merciez, Loan Officer, https://www.ulc.com/lmerciezhome.html)

If you have any questions about what you read here, or anything else related to your plans for real estate, don't hesitate to reach out to myself, or Kathy or LeAnne for guidance.  

~ Wendi