October 10, 2023

Wells: Waiting for lower mortgage rates? It could prove costly

If you count yourself in the category of would-be homebuyers who are sitting on the sidelines, still hoping for mortgage rates to decline, then here’s a news nugget that ought to make you think twice.

The Fort Collins metropolitan area – which covers Larimer County – is projected to experience the largest increase in home prices in the United States over the 12-month period between July 2023 and July 2024. That’s according to the latest CoreLogic Home Price Index, which forecasts 7.9% price growth in the Fort Collins metro. 

Here’s why that news should nudge homebuyers into action.


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If CoreLogic has it right, then a house sold today for $600,000 – the median price for a single-family detached home in the area – would be worth $647,000 in 12 months. Over the course of a year, that $47,000 increase amounts to $3,950 per month in added equity for the new buyer – equity that you could be building for yourself.

Another factor to consider is that interest rates show little sign of declining. Most experts agree that rates on 30-year fixed mortgages are stabilizing for the near future in the vicinity of 7% (as of Sept. 21, the national average is 7.19%). 

These rates, which are up nearly a full percentage point from late September 2022, have been helping to slow demand and keep home prices mostly flat in Northern Colorado. But what happens if rates retreat by next summer – even if it’s just back to 6%?

Most likely, even a slight moderation in interest rates is going to trigger a new wave of demand, prompting many of those would-be buyers to jump back into house-hunting mode, thus creating a highly competitive market – again – along the northern Front Range. But if the CoreLogic forecast comes true, then those new buyers next summer will be competing in a market that’s $50,000 more expensive than it is now.

The takeaway: Buyers who get in the market now not only stand to gain a healthy dose of equity in the coming months, but they will also avoid the potential of confronting a dreaded mosh pit housing market down the road.

Are you wondering about why CoreLogic is predicting such a price swing in Northern Colorado?

CoreLogic’s forecast is based on local trends such as home prices, the local unemployment rate, real disposable income per capita, and population growth – all statistical categories that remain robust in Larimer County. The trends point to pent-up demand for housing in this area, combined with a slim housing inventory, which will bring upward pressure on prices.

Dealing with today’s mortgage rates

Now, here’s a further thought about those interest rates. Understandably, today’s 7% scenario can seem daunting. But there are financing options to take the sting out of the rates.

One example is a so-called 2/1 temporary buydown. In a 2/1 buydown, the borrower pays a reduced interest rate for the first two years of the loan. The start rate increases by 1 percentage point in the second year, and then another 1 percentage point in the third year before stabilizing for the remainder of the loan term. This can help lower initial monthly payments and make homeownership more affordable in the short term.

You should also keep in mind that many sellers today are offering to cover closing costs that are associated with a buyer’s 2/1 buydown. That makes it easier to secure a lower rate while getting into the market at a lower purchase price, and potentially profiting from the appreciation gains projected by CoreLogic.

One more point about interest rates. If you choose to buy at a 7% rate, and the rate falls significantly in the future, you can always refinance to improve your monthly payment.

CoreLogic Home Price Index

20 U.S. metro areas expected to see the highest home price growth,
July ’23-July ‘24

1 Fort Collins 7.9%

2 Santa Rosa, Calif. 7.73

3 Bend-Redmond, Ore. 7.45

4 Casper, Wyo. 7.18

5 Anaheim-Santa Ana-Irvine, Calif. 7.12

6 Merced, Calif. 7.06

7 Cheyenne, Wyo. 7

8 Lakeland-Winter Haven, Fla. 6.9

9 Oakland-Hayward-Berkeley, Calif. 6.88

10 Oxnard-Thousand Oaks-Ventura 6.86

11 Vallejo-Fairfield, Calif. 6.82

12 Pocatello, Idaho 6.79

13 Colorado Springs 6.74

14 Walla Walla, Wash. 6.74

15 Santa Maria-Santa Barbara, Calif. 6.7

16 Sebastian-Vero Beach, Fla. 6.7

17 Seattle-Bellevue-Everett, Wash. 6.68

18 Salinas, Calif. 6.67

19 Stockton-Lodi, Calif. 6.66

20 Napa, Calif. 6.65

Source: IRES

Brandon Wells is president of The Group Inc. Real Estate, founded in Fort Collins in 1976 with six locations in Northern Colorado. He can be reached at bwells@thegroupinc.com or 970-430-6463.

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