The Current State of Denver Real Estate - October 15, 2023

Although the Fed may be about done hiking rates, you can all but bet, they won’t be slashing them again anytime soon either. The days of nearly cost-free money whenever the economy gets into trouble are gone for awhile, which will keep the yields for US bond markets around the 5% mark. Since the Federal government is already over $32 TRILLION dollars in debt, it’s unlikely that the Federal Reserve can allow it to go up much more than that, before dipping into their bag of tricks. So I would anticipate mortgage rates to stay right around the 7.5% to 8% mark for the foreseeable future.

There are several economic implications of this basic shift in financing costs: Savers can finally earn a decent return on cash, money market funds, etc., without feeling pressured to buy stocks. So, with less pressure to buy stocks, especially speculative ones, look for the stock market to come down as well, as investors pull their money out of stocks to invest in more secure venues. Pension funds will be in better financial shape now that the available yields on safe instruments like Treasuries are so much higher than they’ve been in years. Annuities will offer better terms to compete with respectable interest rates. So that’s the good news related to higher interest rates for investors. HOWEVER, how does that affect home buyers and other borrowers? Today’s mortgage rates aren’t high by historical standards, but they are at their highest in two decades. But combine that with all time record highs for home prices and that could force many would-be home buyers to give up or be priced out of the market. Higher mortgage rates figure to keep a tight lid on home sales, which is exactly what’s reflected in the statistics shown above. 60% of folks with a mortgage locked in a rate below 4% in recent years. Many of them won’t want to sell their home and pay 7% on a new loan. Thus, a continuing dearth of listings (down 13.2%) as well as closings, down 24.2% year over year seem to be the current trend.

So those are the reasons not to buy, but here are some reasons, why you shouldn’t put your home buying dreams on the back burner. Although rates, may stay steady, no one has a crystal ball and rates could just as easily increase, especially with the uncertainty in the Middle East. Even though the Federal Reserve didn't raise interest rates in September, it is anticipated that there could be one more rate hike before the end of the year. Buyer’s who want to try and time the market, usually end up on the short end of the stick. Even though inventory is limited, so are buyers, so this may be the best chance for you to finally get your dream home. If you can afford it now, keep in mind, you can always refinance if the economy cools in the years ahead and interest rates head downward. That way, you get to keep your equity, while still lowering your monthly payment expense. Another option is a buy-down. Several options are available, from temporary, to permanent. We, at The Tucker Team, would be more than happy to share with you how this works, if you are in the market for a new home, or how you can advertise this to potential buyers, if your home has been sitting on the market with no offers.

Real Estate is still one of the best long-term investments, as prices have continually risen throughout your lifetime. Don’t miss your opportunity to start saving for your future. Contact any of us at The Tucker Team, for guidance to make your home buying or selling dreams come true.