Market Update, October 12, 2023

The average rate for a 30-year fixed mortgage fell from 7.81% last Friday to 7.6% today. The Fed is watching the housing market, and real estate professionals are urging the government to stop rate hikes.

That’s good news, but so many factors come into play regarding mortgage rates; predicting where they’ll go is impossible.

On Monday, the Mortgage Bankers Association, the National Association of Home Builders, and the National Association of Realtors wrote a letter to Fed Chairman Jerome Powell and asked the FED not to “contemplate further rate hikes” and for the FED not to sell its mortgage securities “until and unless the housing finance market has stabilized and mortgage-to-treasury spreads have normalized.”

The letter-writers make an excellent point when they say that the Fed is trying to reduce inflation but is causing an increase in housing costs.

The letter says:

“In the August CPI report, consumer prices were up 3.7%, while shelter costs were up 7.3%. In July, shelter inflation was responsible for 90% of the gain for consumer prices. The most effective approach to tame shelter costs, and assist on the broader inflation fight, is to facilitate the construction of attainable, affordable housing. Sustained wide spreads or further increases in interest rates make this economic goal more challenging by limiting lot development and home construction, exacerbating housing supply, and pricing out millions of households from the goal of homeownership.”

These groups mention that more housing would help decrease housing costs. Builders are playing a prominent role in our current market. They’ve been able to offer low interest rates to buyers and have quickly adjusted to changes in the market by lowering their prices. (Unfortunately, many individual home sellers are pricing their homes too high for buyers.) We’ve helped many buyers purchase new construction homes recently, and they’re finding it more affordable than buying an existing home. If you’re thinking of buying a home, consider new builds. We can help you find the right community and negotiate on your behalf for the best terms. 

Rental costs in Denver are up about 7% for studios and two-bedrooms compared to a year ago, according to Rent.com. As discussed in previous updates, home purchasing costs are up significantly. If interest rates stabilize, it will have a beneficial effect on housing costs. 

There’s still a lot of uncertainty in the real estate market and the economy. We’ll continue to keep you updated with market news.