It’s happening across the country: Housing markets are suddenly losing their red-hot sizzle, seemingly overnight. This includes Denver, where the once-crazed market has turned cooler in recent months.
What has caused this change?
One of the most significant reasons, experts note, is rising interest rates. Mortgage rates have increased about a percentage point over the past year, from 3.8% a year ago to nearly 4.7% currently. Higher rates have priced some Denver homebuyers—already stretching to afford the city’s prices—out of the market. “The rise in [mortgage] rates paired with this very strong price appreciation absolutely is slowing housing,” Fannie Mae Chief Economist Doug Duncan told the Wall Street Journal.
“I think buyers on the lower-end are feeling like they have been priced out of the market and have given up on the idea of buying in Colorado,” one local real estate broker who often works with first-time homebuyers told the Denver Post.
Statistics support this conclusion: A study by Attom Data Solutions, as reported by the Denver Post, shows the median price of a home sold in Denver County in this year’s third quarter at $430,000. “With a 3% down payment and conventional financing ratios, a buyer would need an income of $117,148 to qualify, the study found. The average yearly wage in Denver [is] $68,419,” notes the Post. Higher interest rates make the payments even harder to reach.
This doesn’t mean, however, that homeowners should fear the kind of market drop we saw in 2007. Experts predict a much gentler slowdown, rather than a steep plunge. Home price appreciation is likely to continue, they note, just at a slower rate. “[T]he market isn’t slumping as much as it is normalizing,” notes the Post.
Steve Danyliw, chairman of the Market Trends Committee for the Denver Metro Association of Realtors, told the Post that if inventory rises from current levels of 8,807 to 10,000 to 12,000, the balance between buyers and sellers will be restored—along with long-awaited sanity in the marketplace.
This should make us all breathe a little easier.
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