Will house prices ever go down

I think we can agree home owners are resolutely against the mere mention of housing prices declining. And to be quite clear, I don’t see the Boulder real estate market in a housing bubble or anything like it. None the less, buyers ask will house prices ever go down? Would it be better for home buyers out there to wait for tomorrow?

It’s a catch-22 in some price points. Strong demand in the entry level price range is running headlong into a lingering Seller’s market made more difficult by the pricing of a fannie mae fixed rate mortgage.

That’s a lot to unpack. Let’s start with a graph that dives into this subject matter.

Home Mortgage Rates Today Versus Yesterday

This graph looks at the difference between home mortgage rates a year ago and today. The blue line is for a 30 year fixed rate and the green line is for the 15 year note. The 52 week range boxes tell the story that we are closer to the highs than we were a year ago.

primary mortgage market survey compliments of dana briganti with allied mortgage showing the change in mortgage rates over the past 52 weeks which is quite brutal having gone from five percent for thirty years to almost seven

Will House Prices Ever Go Down Because of Higher Interest Rates?

The rate home buyers get on their mortgage is not going to change a market by itself. Nor cause home prices to fall in the near future. However, we are seeing a slower rate of turnover. Owners who made a home purchase the last several years with a lower rate are reluctant to make a move when it entails a significantly higher priced mortgage to do so today.

Looking at the chart, you can see a buyer from a year ago was getting a mortgage for about 5%. Today, that’s closer to seven percent. And compared to a few years ago during the ultimate craziness of the market, it is about double the rate.

Blame it on the Federal reserve bank. They are the ones raising rates to dent inflation (and indirectly impacting home mortgage rates).

New Listings Decline For Consecutive Year

This Info Sparks chart is from Ires Multiple Listing Service. It shows that the number of new listings entering the housing market has declined year over year in June.

info sparks graph from iresis multiple listing service describing the number of new listings on the market in boulder county over the last three years. there has been a decline the last three years from eight hundred and one to seven hundred sixty seven and now just six hundred and twenty three

Rising Interest Rates Impact Home Sales

The housing market is facing a new dilemma nationally. As reported on big channels, yesterday’s home buyers are reluctant to trade up if it means doubling their mortgage rates. So they don’t list their homes for sale. And new listings decline. But housing demand remains intact. So prices are staying afloat as inventory stabilizes at a new level.

But. Yeah, I think you heard a but coming. But those houses that are making it to the market need to be perfect. Because fewer buyers are not willing to take on projects or overpay in bidding wars. It is still a Sellers Market, but not the same as we had a few short years ago.

Fewer home owners are willing to take on the cost of doubling their mortgage rates to trade up to a new house. This in turn is reducing the number of new listings. It doesn’t mean will house prices ever go down. But it does limit choices and keep this Sellers Market moving along.

Enter New Construction Homes

A segment of the market that is seeing a good year is the new construction market. Check out the stock sheet on companies like Century Communities. Quite a one year run up in value. Worth mentioning because these builders have found a great marketing ploy: The 2-1 Buy Down.

It’s not a new housing feature.

It’s not an upgrade to make your house look or feel better.

The 2-1 Buydown allows the home builder to have a selling expense in their fiancing department that makes your new payment lower the first year by two percentage points, then lower the second year by one point and then in the third year, viola, you have your regular payment at it’s regular mortgage interest rates value.

As there isn’t a lot of dirt to build upon around Boulder County, young buyers are moving further and further to find new construction opportunities. Investors are following, because the rents on such construction can be lucrative as well. And new homes generally have fewer maintenance issues too boot.

But there might be a sliver of price decline in new builds. Those asking will house prices ever go down should know that it is now common to see new builds taking price reductions to get to sold. That’s not a decline versus a prior sale. But it does mean you might get more house for less bucks depending upon what you are looking at and where!

hydrangea flowers growing in my yard, quite big and beautiful with large white flowers about the size of an adults hand wide open. the flowers are set next to a paver path leading to the backyard

Housing Market Conditions

For buyers, sure rates are tough right now. But what I hear again and again is housing market predictions say rates will fall as inflation cools. So, you have the opportunity to buy into the market today without overbidding by six figures. For sellers, there is demand out there. It is a Seller’s Market. You just need your house in prime condition. Those properties staged, with newer finishes and carpet are still selling in a handful of days.

Check back for more commentary on the Boulder real estate market from local Realtor Bob Gordon. Bob is a local Realtor in the Boulder Colorado housing market with almost thirty years experience working with home buyers and sellers. Licensed since 1995.

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