Will Increasing Mortgage Interest Rates Affect the Parker, CO Real Estate Market?

Mortgage interest rates have spiked over the last month. I’ve been getting questions from potential sellers and buyers of homes in Parker, CO, about what effect mortgage interest rates could have on the real estate market. 

4% mortgage interest rates are still pretty low when you consider that in the 1980s and early 1990s, rates were in the mid to high teens. Last night, I spoke with a friend who said their first mortgage was 14%, and others have told me their first mortgages were at 18%. 4% doesn’t seem so high in comparison.

We can expect to see a couple of effects in the Parker real estate market from increasing interest rates.

Some Buyers Will Be Priced Out

In every market cycle, a segment of buyers is on the bubble with what they can afford to buy. A significant spike in interest rates will price them out of the market. It happens in every real estate cycle, no matter the interest rates.

Combine interest rates with the rise in home values, and some can no longer afford it. The offers they are submitting, some buyers up to 20 to 30 over time, aren’t competitive in the market we have today, or they can no longer qualify for a loan.

With Fewer Buyers, Will Values Go Down?

In the short term, buyers priced out of the current real estate market may not have much of an effect at all. As I said above, 4% is still a pretty low rate historically speaking, and we’ve seen mortgage interest rates at 4% as recent as May 2019. That said, homes were less expensive then than now.

But as rates rise further, it could price even more buyers out of the market. Rising rates will slow demand but not significantly. That said, when demand slows, the number of homes for sale will slowly increase.

Combine rising rates with a 20% increase in home values in the Parker, Co real estate market, year over year, and you’ve got the beginnings of compounding factors that could indeed slow home values and sales.

What’s the Crystal Ball Say for 2022 Interest Rates?

A week or so ago, I studied the prognostications on what interest rates would do in 2022. As a real estate professional, it’s part of keeping current with local and national real estate trends. 

Most economists predicted that mortgage interest rates would finish the year around or slightly under 4%, yet we are already near 4%. I don’t know about you, but I’m relatively confident that interest rates will continue to increase this year. I’m sure there will be some ups and downs but coming in over 4% seems possible.

If you’re interested in buying a Parker, CO home, I advise getting it done sooner than later. As mortgage rates climb along with home values, purchasing becomes more expensive. 

If you need help buying a home, don’t hesitate to contact me. I’ve got more years selling real estate in Parker for over 20 years and can help you find the perfect home for you! Please click here for my contact page.

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