Yesterday I wrote about how mortgage interest rates are the highest they have been in the past year and how it looks like they will be hovering around 4% for the foreseeable future. To read the full blog, click here. Now that we have an educated guess as to what rates will do most likely the rest of summer, it only makes sense to look at how this will impact the Denver Real Estate market and what it means to buyers and sellers.
If we look at historical data, we see that whenever rates increase, so does market activity. This occurs because it gets a lot of buyers off the fence who think they have forever to take advantage of the low rates. And it also convinces renters that if they don't do something quick, their chance to own for less than rent could disappear too.
Since rates his 3.9% last week, the highest in the past year, mortgage applications have risen 3% for the week and are up 14% since this time last year. Buyers are following this historical trend and I believe the activity will continue since there aren't many major signs that rates will fall back to the mid 3's anytime soon.
For buyers, this means that if you are going to act, you may need to sooner than you thought. For every percentage point higher in rate you go, your buying power decreases by 11%. Perhaps it is time to take a look at homes differently. Homes that you feel might be priced too high or more than you want to spend will look completely different at 4 or 4.25% than they will at 3.5% so make sure you have a plan in place with your agent and mortgage broker.
And for sellers, this is just another reason why you need to get your house on the market asap. There will likely be a rise in activity this month for Denver homes as more buyers try to lock in their rates before they possibly increase again so get your house on the market and take advantage of a market we may never see again.
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