Rising interest rates hit some Steamboat home buyers hard

Popular entry-level properties such as Whistler Village Townhomes were selling within five days at the above asking price until interest rate increases drove some buyers out of the market. Now, units, like this one priced at $548,000, stay in the market for 31 days before the close. With rising interest rates, fewer buyers can afford their targeted price range.
Suzie Romig / Steamboat Pilot and Today

Many potential buyers were already overpriced in Steamboat Springs, but rising mortgage payments in recent months have made it harder for many more people to buy in Routt County.

Doug Labor, broker at Steamboat Sotheby’s International Realty and expert in local real estate statistics, explained how monthly payments for some of the most desirable affordable properties in Steamboat have almost doubled, which he considers “surprising” and “very concerning”. for buyers. .

Mortgage interest rates have risen by around 2% since the start of 2022, from around 3.5% to 5.5%, in an attempt by federal authorities to rein in the rapidly rising inflation rate of the economy.

At the same time, housing prices in Steamboat continue to rise, but not at the same rate as over the past two years, Labor said.

Market and interest rate fluctuations add stress to local buyers.

Modesty and Matt Martinez at Steamboat recently missed out on buying a property with acreage in Oak Creek as their mortgage payment was set to double.

“Because of interest rates, we can’t buy this place,” Modesty said. “We had to start looking at different price ranges to account for rising mortgage rates. It was much more stressful than expected.

One housing type in Steamboat that has risen more than other categories is the 15% lower price that includes townhouses and condos, which has risen about 42% since 2021, Labor said.

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A launch condo that had a median price of $299,500 at the start of 2021 could now be on the market for $425,000. Add that price hike with the increase in borrowing rates and the monthly payment for a 30-year fixed mortgage for a loan of $382,500 with a 10% down payment rose from about $1,210 the last year to $2,172 this year, the Labor Party explained.

Essentially, raising the mortgage interest rate by 2% in the first six months of 2022 adds $119 per month per $100,000 loan repayment, Labor said.

The Labor Party example provided earlier this week does not include the Federal Reserve’s decision to further raise the interest rate by 0.75% on Wednesday, July 27.

“As the number of transactions declines, the price to buy properties continues to rise, especially in markets where property is limited,” said Kendra Thomas, team leader at Land Title Guarantee Co. at Steamboat. . “Resort markets have seen a reduction in purchase transaction orders over the past one to two months.”

Labor agreed that the limited supply of homes with fewer listings on the market continued to gradually drive up house prices.

“Due to lower housing supply compared to the first half of last year, this has slowed our sales so far this year,” Labor said. “The market value of a house is reduced because few people can afford it. So you don’t get multiple offers like you would before.

Whistler Village Townhomes units are in the lowest 15% of the Steamboat real estate market in terms of cost, a highly sought-after price that has increased 42% over the past year.
Suzie Romig / Steamboat Pilot and Today

The National Association of Realtors reported last week that sales of existing homes fell for the fifth straight month in June, with sales falling 14.2% year over year in June 2021.

The median existing home price for all housing types in the United States was $416,000 last month, according to the association. This represents a price increase of 13.4% compared to June 2021.

Prices rose in all regions of the United States and June marks 124 consecutive months of year-over-year increases, the longest streak on record, according to the national association.

Realtor Marci Valicenti, co-owner of Colorado Group Realty, said limited inventories have made it very difficult for many local buyers.

“In recent years, the lack of inventory has become quite critical,” Valicenti said. “Rising interest rates have now eliminated some potential landlords to continue to rent. The entry-level buyer has been hit very hard by rapidly rising interest rates and loss of affordability . »

Land Title’s Thomas noted that “cash is still king in most resort markets”, which means first-time and low-income buyers are at a disadvantage if they compete for the same property against offers. cash.

She said the percentage of cash transactions by county for June 2022 included 42% in Routt County, 43.5% in Eagle County and 44.6% in Grand County.

The work still advises committed buyers to go ahead.

If someone looking to buy a property today finds the right home and it is reasonably priced for our market, I would advise them to make the purchase as it looks like the market is going to appreciate further in due to lack of supply. And there is no return on investment for the rental.

Valicenti also recommends home purchases now, and she suggests buyers watch interest rates and be ready to refinance in one or two years.

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