This year’s rise in mortgage rates coupled with the increase in price of single-family homes could price prospective buyers out of Colorado’s housing market.
The average interest rate on a 30-year fixed-rate mortgage has increased since January’s election and according to Freddy Mac, interest rates rose from 3.54% in November to 4.32% in December.
As of mid- February, rates are averaging 4.17%, and the uptick in rates affects the potential borrowers buying power. When interest rates increase, so does the buyer’s house payments.
Like the rise in interest rates, an increase in the value of homes has also begun to price out potential buyers. As of January, 2017, the median sale price for a single-family home in the Denver metro area was $380,000.
According to the National Association of Realtors, for every 10 basis point increase in interest rates — for example from 3.8% to 3.9%, home buying across the decreases by 35,000 transactions per year, and for every full percentage point, there are 350,000 fewer transactions.
Inventory of homes in Metro Denver is currently very low and interest rates are poised to rise before year end.