The spring market is in full swing, fueled by a notable boost to housing inventory in many areas across Colorado. Last month, the Denver Metro had 4,711 new listings hit the market, a 27.8% increase year-over-year, and a welcoming trend for buyers who are ready to jump on opportunities. Demand remains strong – the median days on market across the Denver Metro was just 8 days for the month of April. The same is true across the Front Range: Boulder County saw a 23% increase in new listings year-over-year, Larimer County up by 15.4%, and Colorado Springs up by 14.1%. Even the mountain communities are feeling the spring market with new listings up by 23.9% year-over-year in Eagle County, 9.3% in Buena Vista, and 39.8% in Summit County.
What’s particularly interesting about this spring market is that we’re still seeing the typical seasonal flurry of activity, even in the face of higher interest rates currently sitting around 7.25% on a 30-year fixed-rate mortgage. This could be a strong indication that consumers are fully digesting the reality that interest rates likely won’t be coming down - at least anytime soon. Those who have been waiting on the sidelines for more favorable terms are likely choosing to make a move out of necessity, while realizing that home prices have only continued to rise.
Back in December, we were given some temporary hope as mortgage rates quickly fell to the 6.5% range, and the Fed suggested that there would be three to four rate cuts this year. While we haven’t seen any rate cuts, in last week's Fed meeting, Fed Chair Jerome Powell led the financial markets to believe that there will be no more hikes, and the next move will likely be a rate cut. But as we already know, nothing is guaranteed. So, will we see any significant decline in mortgage rates in the near future? And what can you do to combat the effect of higher rates on your next home purchase?
As always, the ability to adapt to changing housing market conditions will yield positive results for consumers. From lending institutions to real estate brokerages, creative products and services have sprouted up across the country in recent years to address the challenging mortgage rate environment. At 8z, we’re fortunate to have some of those creative solutions in-house. Our partners at Collective Mortgage can offer any buyer a 1% temporary rate buydown, and their Refi Rewards program allows you to refinance anytime within three years of your purchase with zero lender fees. Even a 1% decrease in your mortgage rate can save you thousands a year, and then if rates do come down in the near future and you choose to refinance, you’ll keep more money in your pocket by not having to pay those lender fees. It’s also a good idea to analyze the cost of other rate buydown options, whether permanent or temporary. In some cases, the cost to lower your mortgage rate upfront can be easily negated by the savings you’ll realize over the life of your loan.
So, will we see mortgage rates fall below 7% in 2024? In short, and as always, nobody can say for sure. However, based on the most recent sentiment from the Fed and other financial entities, there seems to be a chance. The markets see that the Fed is serious about bringing inflation back down to its goal of 2%. This is good for protecting the value of long-term bonds like mortgages, as inflation erodes their value. If inflation continues to moderate, it will help long-term rates moderate as well.
"Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion." - ​​​​​​​FOMC Statement May 1, 2024. This announcement was also embraced by the markets because a slower pace of supply of bonds coming into the market can help put downward pressure on interest rates. This is good news for mortgage bonds and to hopefully see interest rates come down.
Possibly having a bigger impact on rates than the Fed, was the Treasury's announcement that they will not need to sell many more bonds in the 2nd quarter to help fund the government. This was good news for bonds and rates. Why? Bonds hate more bonds. When the Treasury has to sell more bonds to fund the government, it puts downward pressure on prices and upward pressure on yields. So, this was positive news for bonds.
The bottom line: Interest rates are trying to find a peak, and these recent announcements were overall positive as we move deeper into spring. While we don't expect much more of an uptick in rates, it’s important to remember that we should also not expect much improvement either, at least in the short term.
