Creative Financing

The number of sales is down 20% compared to this time last year. The main reason is that higher interest rates have made homes less affordable. The current 30 year fixed rate mortgage is about 7.25%. A year ago, the interest rate was about 5.5% and two years ago it was about 3.25%. A recent study found that 71% of would be buyers say that they won't look to buy a home until interest rates get back in the 5's. It's hard to say if or when interest rates will be in the 5's, but there are creative financing options that a seller can offer in order to help a buyer lock an interest rate in the 5's.

Mortgage rate buy downs are becoming more popular and in some cases are the driving force behind a sale. If a seller pays 3 or 4 points to buy down the rate, a buyer could lock in a roughly 5.75% 30 year fixed rate (depending on the rate at the time). A seller would be motivated to pay down a buyer's interest rate because it could help sell their home and could actually save the seller money. For example - a seller who is considering reducing their price by $50,000 may be better off paying $25,000 towards discount points so that a buyer can get a rate in the 5's. In this example, the seller saves $25,000 and the buyer saves over $500 per month on their mortgage payment. The old adage in the real estate business is that, "Buyers don't care as much about the price as they care about their payment."

For Buyers who have been sitting on the sidelines, call me to discuss how Seller paid discount points could get you back in the game.

For Sellers who are hesitant because you've heard the market has slowed, call me to discuss how we can use this strategy to your advantage.

As always, I appreciate your business and your referrals. I hope you have been enjoying the end of summer.

Summer Market Update

The chart below says it all - higher interest rates are leading to fewer sales and lower prices. What doesn’t show from a quick glance at the stats is that the Boulder County Real Estate Market remains stable. Your property may not be worth what it was one year ago (the top of the market), but it's still worth more than it was two years ago. The median price of single family homes in Boulder County is up 4% to 7% compared to 2021 and the median price for Condos/Town Homes is up 10% to 17% compared to 2021.

We have emerged from a 10 year period of appreciation into a slowing market. The Boulder County real estate market traditionally flattens out after periods of appreciation, so this is normal. For sellers, you will need to price your home more aggressively in order to get it sold, but it should still be a premium price compared to two years ago. For buyers, interest rates are higher, but there is more room to negotiate price as well as contract terms which could include a seller paying points towards reducing your interest rate.

Please reach out if you want to discuss the current market and how I can help make it work for you, whether you are buying, selling or both.

All the best,

Rich

Quick Market Update

Higher interest rates have slowed down the real estate market in Boulder County and the results of the slow down are interesting. Earlier this year I reported that the inventory of available listings had increased dramatically since last year (up 232% in March). Now that we are almost halfway through 2023, a different trend has emerged. The number of single family home listings is down 11.5% compared to a year ago and the number of attached townhouse/condo listings is down 5.4%. The number of sales is also down with single family home sales down 24.5% and townhouse/condo sales down 12.7%. You might assume that higher interest rates and a slower market would lead to a dramatic drop in home values, but the limited inventory has kept prices pretty stable. The median sales price of single family homes is down 5% from a year ago and the median sales price of townhouse/condos is down 3.4%. I would consider these 3.4% to 5% price decreases we are seeing today very modest, since one year ago was the top of the market after 10 years of appreciation.

So, what is happening? The Boulder County real estate market is very stable. Traditionally, periods of rapid appreciation are followed by periods of prices being flat. During flat periods, we generally don't see many distressed sales where sellers are taking a huge loss. Many sellers in Boulder County are financially able to wait if the market conditions are not right for a sale. As a result, many sellers will pull their home off the market if they don't get their price. This is contributing to the decrease in available listings and the decrease in the number of sales. Another factor leading to the decrease in listings are the interest rates. A homeowner with a 3.25% mortgage may hesitate to sell and buy a new home if their new mortgage rate will be at 6.75%.

The factors mentioned above will lead some sellers to stay put for awhile. Over time, some homeowners will decide to sell at a lower price than they had wanted because they are simply ready to move on or are excited to start their next stage of life. The Boulder County real estate market is very stable and is still very strong. For those who want to sell, they will just need to be a bit more competitive and patient in the current market than in the last few years. It's impossible to time the top of the market, but now that we know the market has peaked, I would encourage sellers not to feel bad about selling for close to what they could have gotten at the peak. Selling for 95% of peak market value still represents a huge profit for most homeowners in Boulder County.

For buyers, there are good opportunities in the current market. Buyers may not have a huge number of available homes to choose from, but they have more time to make decisions and more negotiating power.

As always, there are opportunities for both sellers and buyers. Please contact me to discuss how to make the current market work for you. Also, I hope you enjoy the upcoming July 4th Holiday and Happy Summer!

All the best,

Rich