As summer vacations end and interest rates continue to climb, the Denver market remains unpredictable. Would-be buyers and sellers are weighing the “golden handcuff” dilemma, where their historically low interest rates on their homes are keeping them locked into that particular place. 91.8 percent of mortgages in the U.S. are under six percent, while 82.4 percent are under five percent. New listings were down 15.33 percent month over month and down 24.76 from this time last year. Conversely, active listings at month-end were up 3.76 percent month over month, showcasing a slight increase in inventory.
Inventory aside, many would-be buyers are in a position where they need to sell their home first before purchasing a new one. As a result, contingent sales, which allow an individual to purchase their next home with the caveat that the purchase is contingent upon the sale of their current home, are on the rise. Sellers are now more willing to accept contingent offers today as they realize the market is shifting, and ultimately, want to sell their homes. However, the Denver market as a whole still has a lack of inventory, and while demand is slowing, it is still in a seller’s market for many of the price points, with the exception being under $299,999 and $1.5 million to $2 million+
“It’s a testament to sellers willing to bend since pending sales were down slightly at 1.73 percent from last month and 2.58 year-over-year,” commented Libby Levinson-Katz, Chair of the DMAR Market Trends Committee and Metro Denver Realtor®. “Closed sales were down 16.34 percent month over month while they were down 18.47 percent year-over-year. Buyers who do not need to sell to purchase their next home are looking at 2-1, or other temporary buy-down programs, to help alleviate interest rate woes. These loan programs are attractive because they reduce the current interest rate for two years before the original rate at application applies. The general prediction is that interest rates will go down within the next year, allowing these borrowers to refinance to a lower rate which helps buyers purchase now as opposed to sitting on the sidelines.”
Regardless of loan programs and willingness to negotiate from sellers, buyer activity continues to slow as rates increase. Buyers are more confident offering under the list price and asking for seller concessions to help buy down their interest rate even for new homes hitting the market. Consequently, seller concessions increased from 29.2 percent last June to 48 percent this June, averaging $7,295.