Money is on sale (again).
30-year mortgage rates now sit at 3.3%.
This is less than half of the long-term, 40-year average.
This is also almost a full percentage point lower than they were one year ago (which was still very low).
Let’s put this in real numbers.
A $300,000 loan at today’s rates has a $1,313 monthly principal and interest payment.
One year ago, that same loan would be $1,432 per month.
That’s a 8.3% difference in monthly payment.
The fact that money is on sale is one of many reasons that the housing market remains very strong right now.
At Windermere Real Estate we are taking Safer at Home and Social Distancing very seriously. Our people are following our Safe Showings protocol, staying connected to their clients, and providing help wherever needed.
April represents the first time we can look at the impact of COVID-19 on a full month of real estate activity.
To no one’s surprise, activity in April in terms of closings and new contracts did slow significantly.
Much of this slowing was caused by in person showings not being allowed for most of the month. (showings are now allowed again by following Safe Showings protocols)
Here’s what the numbers say…
Closed transactions were down compared to April 2019
• 26% in Northern Colorado (Larimer & Weld)
• 27% in Metro Denver
New written purchase agreements were down compared to April 2020
• 48% in Northern Colorado
• 44% in Metro Denver
So, while activity did slow, there was nothing resembling a “screeching halt” that took place.
While the way property is shown has certainly changed, the market is still very active and we expect activity to increase even more with showings now being allowed again.
This week we hosted our clients and friends for a special online event with our Chief Economist Matthew Gardner.
Matthew talked about a variety of topics that are on people’s mind right now including home values.
Matthew sees no evidence that home values will crash and actually sees signs that they may rise this year nationally.
Here’s why he says this:
• Mortgage rates will remain under 3.5% for the rest of the year so there won’t be any interest-rate pressure on prices
• Inventory, which was already at record-lows, will drop even further keeping the supply levels far below normal
• New home construction will continue to be under-supplied and will be nothing like the over-supplied glut of inventory that we saw in 2008
• The vast majority of employees being laid off and furloughed are renters
• Home owners have a tremendous amount of equity in their homes right now compared to 2008 which will prevent an influx of short sales and foreclosures
If you would like to receive a recording of the webinar we would be happy to send it to you. Feel free to reach out and ask for the link.
Our Chief Economist made a video for all of our clients where he shares his perspective on COVID-19’s impact on
housing. You can watch it by clicking the image below:
Headwind vs. Tailwind
So far the tailwind of historically-low mortgage rates are prevailing over Wall Street and COVID-19 concerns.
Buyers are still active. Properties are still closing. Moving trucks are still showing up at people’s homes.
Open house traffic has declined, but we notice plenty of buyers looking for property. (one of our open houses last weekend had over 40 visitors)
For many, the interest rates are just too good to pass up.
We even see instances of multiple-offer situations for properties priced right in high-demand locations.
Rates today, compared to 4%, equate to not only a monthly savings for those refinancing but also equates to tens of thousands in additional purchase power.
For the average price of a home on the Front Range, the savings is $171 per month and the increased purchase power is $35,811.
Here’s what we expect to happen over the coming months. Listing inventory and transaction volume will both decline. We will no doubt see lower activity compared to a year ago.
But thoughts of the market “coming to a screeching halt” can’t be validated because of the historical performance of our market and because of the inherent fundamentals in place.
We will continue to track the numbers and communicate the facts so that you remain well-informed.
Check out The Scoop all about the Northern Colorado real estate market below!
Check out the latest Gardner Report from Windermere’s Economist Matthew Gardner by clicking the picture below!