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Mortgage Interest Rates Hit Historic Lows

Posted at 10/23/2020 01:27 PM by Pat O'Connor

denver real estate and interest rates

Mortgage rates continued to reach historic lows this week, fueling people’s desire to purchase a new residence or refinance their existing home. This marks the 11th time rates have dropped since the beginning of the year.

According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage is now at 2.8%. This signifies the lowest level in almost 50 years. The 15-year fixed-rate mortgage is even less at 2.3%.

These jaw-dropping rates are occurring during a time of extremely low housing inventory and bidding wars. According to Megan Aller, an account executive with First American Title, a premium has been placed on Denver area homes priced between $500,000 - $1 million. Homeowners of properties in this price range are reaping the rewards with multiple offers and quick closings.  

The good news is that with these low rates, people can actually afford more expensive homes. Generally, a one percent rate drop adds an additional $30,000 to your buying power, according to the National Association of Realtors

Generally, a one percent rate drop adds an additional $30,000 to your buying power, according to the National Association of Realtors

For example, say you’ve found a home listed for $400,000. You can offer a 20 percent down payment so your mortgage amount is $320,000. Without setting aside money for homeowners’ insurance, HOA fees and property taxes, your monthly mortgage payment would be $1,437 with a 3.5 percent interest rate.

Now, say your interest rate is 2.8 percent for the same house. Your monthly payment would be $1,315. Furthermore, a 2.8 percent interest rate might allow you to look at homes in the $450,000 range (20 percent down = $360,000 loan @ 2.8 percent means a monthly mortgage payment of $1,479).

Refinancing Your Current Home

Home buyers are not only reaping the benefits of low mortgage rates; current homeowners stand to reduce their monthly mortgage payment by refinancing. Depending on when you bought your home and what your interest rate was at the time, you could be saving hundreds of dollars each month and even get some cash out for a home renovation or remodeling project.

Inventory at Historical Lows

On the downside, low interest rates have impacted home inventory. The supply of homes available to homebuyers hasn’t been able to keep up with the rapid pace of home sales. As a result, we are in the thick of a home sellers’ market where the seller definitely has the upper hand.

In Denver, the average number of days a home is on the market is 23 (detached and attached combined) and last month marked the lowest number of active listings in any September on record (5,301 homes). For potential buyers, this equates to having to schedule an immediate showing when a home comes on the market, and make a quick decision that often requires offering full price or even above asking price. 

According to an article in Marketwatch, nationwide, more than seven in 10 homes on the market in September sold in less than a month. As a result, by month’s end the total inventory of homes for sale dropped to a 2.7 months’ supply, the lowest on record. A 6-month supply of homes is considered to be indicative of a balanced market.

Even though home prices are on the rise, home sales grew in every region across the country, led by a 16.2% jump in the Northeast, the National Association of Realtors reported.

If you are ready to start looking into a home purchase or have any questions about housing in the Denver or Vail areas, the brokers at Usaj Realty stand ready to assist you with all your real estate needs. Please contact us today at 720-398-2999 to find your dream home.

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Posted by Pat O'Connor

Pat O’Connor has dual citizenship in both Wisconsin and Colorado, having been born and raised in Wisconsin Dells, but later adopted by the Centennial State. A graduate of the University of Colorado (B.S. Journalism, 1980), O’Connor began her career as a sportswriter at the Boulder Daily Camera under the tutelage of the venerable Dan Creedon. Her experience also includes stints in public relations at Aspen Highlands Ski Area, the Colorado Trial Lawyers and the Colorado Division of Wildlife. When she isn’t piecing together sentences, the self-proclaimed “Cheesehead” enjoys traveling, running, playing golf, hiking 14ers, horseback riding and skiing. During football season, she can be found cheering for the Buffs and "whooping it up" when the Packers win. She loves talking sports and giving recommendations on cheese curds.

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Topics: Home Buying