While March finally saw an uptick in inventory, continued demand has finally pushed average home prices over $700,000 to $705,812 in the Denver Metro area. Month-end inventory was up 81%. This number sounds impressive, but resulted in only 995 more listings at the end of March than in February. While demand remains high, we hope that the increasing inventory, in any amount will spread out buyers. With more inventory, buyers may not have to be quite as aggressive to get a home under contract.
Interest Rate Outlook
Many potential Metro Denver buyers are feeling the effects of the Fed raising interest rates. We are seeing lenders regularly offer rates over 5%. The Fed is expected to make 2 back to back, half-point, interest rate increases in May and June in an effort to curb national inflation (Reuters). With the unemployment rate at 3.6% (only slightly higher than the pre-pandemic, record low), the Consumer Price Index at 8.5% (the highest in four decades), and a surge in global commodity prices set to continue, most analysts say the Fed needs to move quickly to keep price pressures under control. The Fed’s goal for the Consumer Price Index is 2%. Of polled economists, the majority believe despite efforts by the Fed, inflation won’t approach 2% until 2024 (Reuters).
Effect on Buyers
In the past few years, lenders have been able to regularly offer financing with a down payment of 5% or less. Potential buyers that planned to use these financing options will be hardest hit by these rate increases. Higher interest rates may start to discourage some buyers and start to relieve the intense buyer demand. We believe buyer demand will still push prices up. We have already seen almost 20% appreciation for properties over last year.
In conclusion, while we don’t expect prices to fall in the Denver market any time soon, we do believe that rising interest rates will cause a shift in the market. Sellers will continue to see incredible returns on investments made even in the last year. If you have questions on what this means for your real estate goals, give us a call or send us an email. The Denver market is constantly changing and we are honored to guide you through the process.