Megan Aller, statistician with First American Title Company, says the Denver Real Estate Market is already starting to slow down just a little bit. But, the cooling is hardly noticeable. She’s warning Sellers get their properties on the market soon to avoid a possible slowdown later this year. Because, many economists believe interest rates will start to rise again as inflation persists into next year.
Rising Mortgage Rates Could Threaten Home Prices
Clients ask me all the “when will this insanity end”. Because, home prices are being bid up every month to new all time highs. The Denver real estate market is booming. Megan describes the statistics for the “sweet spot” of this frenzy. That’s the homes selling between $500,000 to $1,000,000. She says those home are the most sensitive to any rise in mortgage interest rates later this year.
Already, Megan sees the beginnings of the seasonal slowdown in Denver homes sales. The number of homes selling is already declining slightly. But, the number of home showings is dropping even more dramatically.
Aller does not foresee any kind of “burst of the bubble”. Instead, she sees decreasing pressure on prices and perhaps more time on the market. Most importantly, she thinks Sellers need to “hurry-up” to get their listings onto the market as soon as possible.
I’ve been selling homes in this Denver real estate market for over 40 years now. I have lived through the cycles of the market. The booms and busts are never predictable. They seem to come on quickly. They are subject the whims of the markets. That includes the market for mortgage backed securities.
Why Are Home Loan Rates So Low?
Right now, the Federal Reserve Board is purchasing heavily the mortgage bond market. They have said they plan to continue buying at the rate of at lease $40B per month. That alone is enough to keep home loan rate artificially low. However, they have been talking about when to begin to taper those purchases. In other words, the Federal Reserve Board will decide when those rate start to go back up to normal. As a result, they will decide when to cool off this frantic real estate boom in Denver and across America.
Inflation has been hot in the last two months with both producer and consumer indexes coming in higher than expected and higher than the Fed’s announced goals of 2% annual inflation.Higher rates could eventually be used to tame inflation if the higher rates persist longer than the Fed can tolerate.
So, Denver buyers and seller should prepare the possibility, or even likelihood, of higher rates by the end of this year or the beginning of next year. Even Sellers could be adversely impacted by higher mortgage rates especially in that sweet-spot of the Denver real estate market. So, Sellers should seriously consider getting on this still-hot market as soon as possible.
Megan Aller issues a weekly real estate report to Denver Realtors that covers all prices ranges in the Denver real estate market.