Snow Day!!! I can’t remember the last time school was canceled due to snow in Delta County. Ive only been in the North Fork for 15 years and it seems like in that time maybe two snow days in that time? We are all excited in the Canode household today and plan on heading up into the hills to practice snowboarding on our favorite local “backcountry” hill. My son just got the snowboarding bug and it’s always easier to learn in powder! But first while the snow is falling lets talk about falling mortgage interest rates… or the lack thereof.
Currently, as of February 15th the 30-year, fixed mortgages stand at about 6.6%. These are high rates historically speaking, but it’s actually 1% less than the local high back in October 2022 of 7%+. Back then the Fannie Mae Home Purchase Sentiment index was at an all time low. Today its only slightly better, with just 17% percent of respondents agreeing that now is a good time to buy a home in the USA.
In the 1970s interest rates hovered around 7% and continued to march upward to a peak of 18%+ in 1981! Since then we have seen a very steady decline in rates with a local bottom of 2.7% in November 2020. And since then rates have spiked tremendously to where we are now which is quite close to where we were in the early 70s.
What does inflation do to home purchasing? Well, by way of interest rates rising, coupled with higher prices spurred by a shortage of available housing, purchases decrease which is where we are at now. If we see inflation dropping, so too should interest rates, but I predict if rates drop and home purchases increase, so too will our prices start to rise once again. With home building slowing over the past 30 years, the United States actually has a compounding problem. Continuing lack of supply is increasing home values.
Historically it is a tough time to be a home buyer; likewise it’s not the easiest time to be a seller. (Not like 2021!) I recommend sellers be patient in this environment and be willing to accept your realtor comparitive market annalysis. Sure, feel free to try and squeeze out more than your recommended starting sales price, but if you truly need to sell in a timely manner, be ready to slash those prices. And if you start seeing “increasing inflation” headlines popping up in your news feed recognize that this is a shift and you may need to roll (down) with the market.
I recently read an eye opening article about Warren Buffets first house, which he reportedly still lived in until recently. In the mid 1950s Warren paid $31,500 for his home. Today is worth somewhere around $400,000. If Warren had put that lump sum in an S&P 500 Index fund it would be worth over $13,000,000 today! Of course you don’t live in an index fund, but it is a fun fact regardless. Warren states that it’s not always a good time to purchase a home especially if you are borrowing money. Just a 1% point difference in your mortgage interest can be huge. For example on a $300,000 home a 1% difference can mean an extra $50,000 in total interest over the life of a loan. For perspective, if one were to buy a house for $300k at current interest rate of 6.6% the total interest paid over the life of the loan would be over $388,000!
Its a tough time to be in the housing market. I won’t paint a rosy picture that it’s always a good to time to buy or sell a home. Affordable housing appears to be a thing of the past in Colorado and it is rapidly changing the culture and feel of our little mountain and valley towns. It’s certainly different than when I moved to the North Fork Valley in 2006. We came here because it was hands down the best bang for the buck in Colorado with regards to the sweet, safe, clean, and friendly lifestyle you got for your money. It is still that special place in my opinion, but to be honest, we could not afford to move here if we had to pay today’s prices. We feel thankful that we ended up here when we did!
So long until next time. My son and I are going to take advantage of this rare snow day!
Jay is a broker associate with ReMax Mountain West. He can be reached at [email protected].