November Mortgage Trends Insight | Guest Post

Inventory, interest rates and appreciation are the real estate hot topics this month. As a member of DMAR's Market Trends Committee, I want to highlight some of the data I am seeing and how it can help you lean into your buyers and sellers. Right now buyers and sellers are operating out of fear. They are hearing that the market is softening, that interest rates are going up and that demand is down. They are immobilized in a time when they should be taking action. Right now continues to be an incredible time to both buy and sell.

Let’s look at some of the data. What we are seeing this October is a track back to normal seasonality. This is a welcome change. After years of a lack of inventory and artificially held low interest rates, most first-time homebuyers were kept out of the market due to the lack of homes and being out bid. Now inventory is up from bottoming out in December at 3,854 homes for sale (attached and detached). Supply and demand play a critical role in the health of the market. December’s all-time inventory low stressed the Denver market and was unsustainable. Since then, we have seen inventory come back up to 8.539 homes for sale in October. This is a 35 percent year over year gain, and a more than doubling since December. 

Another great sign is under contracts is up over five percent, showing buyer interest. Demand can also be measured by mortgage purchase applications remaining par year over year in a rising interest rate market. Rates ticked in at 0.93 percent higher than a year ago stressing affordability and all experts agree, rates are going up. The amount is still in question with some quoting 5.2 percent next year, others 5.5 percent in 2019 and as high as 6.5 percent in 2020.  But let’s put this into perspective compared to the historical average 30 year fixed mortgage interest rate of 8.16 percent*. So, today’s rate of 4.83 percent still provides buyers a phenomenal opportunity. Also worth noting, as interest rates rise, a median priced home only goes up $25 for each 1/8^th in rate. 

Lastly, let’s look at appreciation: year to date, appreciation is strong at 8.47 percent primarily due to the first quarter number. October saw a seasonal drop in appreciation coming in at 5.26 percent. A homeowner continues to gain incredible wealth with the ability to leverage. Consider a five percent appreciation on a home worth $400,000 when you only need to put three to five percent down. Real estate gives you an incredible path to build wealth... even at more normalized appreciation levels. Let us remember: a normal appreciation is 3.6 percent.

*since they were tracked in 1972