Depending on your perspective, buying a house today is better or worse for your pocketbook. Plus: How Coloradans are coping with higher prices.
Inflation was on the brain this week, especially at the state Capitol. The rising interest rates — the Federal Reserve upped them again Wednesday — had the legislative budget committee learning “the risk of a recession in the next 18 months” is 50% higher than in June.
That’s according to the economic forecast presented Thursday by the governor’s Office of State Planning and Budgeting. The usual suspects were blamed: fallout from the war in Ukraine, ongoing inflation and the Fed tightening its monetary policy even as its chair Jerome H. Powell acknowledges that increasing rates “will also bring some pain to households and businesses.”
There’s always something new each week with the Colorado economy. And we’ll dive into how Coloradans are coping with higher prices below. But first, let’s look at how rising mortgage rates are affecting the local housing market.
Colorado houses cost more … or less
If this were 2019, the for-sale housing market in Colorado would be considered booming. Sellers are getting about 40% more than what they would have if they had sold their house three years ago. And even with the market cooling this year, the median price of a house sold in August was 10% higher than a year ago.
But higher interest rates did seem to affect potential buyers borrowing money to buy one. Interest rates for a 30-year-fixed loan were 6.62% on Friday, up from 6.35% from a week earlier, according to Mortgage News Daily. The Fed has raised rates five times this year, or a total of three percentage points. That includes three consecutive months of three-quarter point increases, a historically high increase for one meeting. In early June, the same 30-year mortgage rate was 5.55%.
Buyers are no longer snapping up houses within 12 days of hitting the market in Denver. They’re waiting 21 days. They’re not paying more than the seller originally asked for. Take a look at the home sales for August, between 2017 to 2022:
According to data from the Colorado Association of Realtors, the average seller is getting 99% of what they priced the house for, compared with 102% a year ago in Denver and the state.
But median sales prices have also dipped each month this year since May, according to the organization’s data. Between May and August, the median sales price in Colorado fell 4.8% and 4.6% in Denver.
That’s the reverse of what happened in the past two years, when prices rose or stayed flat between May and August. But normally, Leprino said, median prices do decline over the summer as families try to get their move done before school starts.
“It would be irresponsible of me to say (rising interest rates) had nothing to do with it, and I’m sure it did to a certain extent,” he said. “But looking at it from a historic perspective, prices are always lower in August. … It’s just seasonality in our market.”
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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.
