Market Updates »
Spring is upon us; the grass is starting to green up, and we’ve started to dust off our shorts and sandals. However, not everything is getting dusted off and ready for the new season. For Sale signs are staying in storage and still waiting for that spring rush of new inventory around Denver. That’s right, Denver’s real estate market still has an extreme inventory shortage, which continues to put major pressure on buyers battling to get their offer accepted on their next home. Even with one major difference this past month, the market continues to beat up buyers and give homeowners huge appreciation.
In the last few weeks, we have seen major jumps in mortgage interest rates. At the beginning of the year, we were seeing many buyers with TK Homes locking in rates throughout the 3’s, depending on the loan program and borrower. During the first quarter, rates showed signs of increasing and broke into the 4’s but only to go back down. However, in the last couple weeks of the first quarter, they made a statement and jumped into the high 4’s for those with larger down payments and near perfect credit, and everyone else was seeing 5’s. Buyers haven’t seen these higher interest rates since before COVID. At the beginning of the year, we made a prediction that it would be increasing interest rates that would finally put some downward pressure on Denver’s hot real estate market, so were we right?
Even with higher interest rates now for a few weeks, the market hasn’t shown any signs of slowing down. The few new homes hitting the market each week seem to be getting swarmed with eager buyers ready to make strong offers just as they were before these rate hikes. Come Monday, most homes are under contract well over list price and with full appraisal gaps to guarantee that sales price. So, if interest rates are likely going to cause the market to slow, you may be wondering why we haven’t seen that these past couple weeks.
At first, I was wondering the exact same thing, after all, 5% seems so high. However, when I took a step back and really looked at the big picture, I was able to make sense of what is going on. Historically, 5% is still a good interest rate; it just seems high now due to the past couple of years. With Interest rates still in the high 4’s and low 5’s, buyers are still willing to stay in the game and pursue that new home, especially strong buyers that have been making the high over list offers with the appraisal gaps. The buyers that are most affected with the new interest rates are going to be the buyers that were already struggling to get their offers accepted. Unfortunately, these weren’t the buyers that were going under contract before the interest rates went up. This means that the market might have lost buyers with the new, higher interest rates; however, these weren’t the buyers that were driving the prices up over list price. Those buyers are still active and in the game. This means that as of right now, these rates effectively have had no change on the Denver market conditions.
We will continue to monitor the market conditions in Denver, watch what interest rates do, and report back the first Wednesday of every month on Denver’s real estate market. Make sure to subscribe to our blog so you don’t miss an update. If you want to take advantage of Colorado’s hot real estate market, let’s talk and create a plan that meets your goals. TK Homes is here to help you sell, buy, and invest in real estate across the Denver metro area.
~ Article written by Team Leader & REALTOR®, Trevor Kohlhepp