How the Federal Reserve rate hike could impact Denver housing market
The Federal Reserve's latest interest rate hike could make an already expensive housing market even more challenging for some Denver metro area homebuyers.
For the first time in three years, the Federal Reserve raised interest rates by a quarter of a percentage point. The increase comes as buyers are already weighing high home prices and the broader cost of living.
Denver Residential Realtor Craig Harcek is helping buyers navigate what higher rates could mean for their monthly payments, and how this could impact those trying to sell their home.
"We have a recency bias of those ultra-low rates, and it's still a shock when people hear what the rate is or see what their payment is going to be at that rate," he said.
Harcek is selling a Denver condo in the Capitol Hill neighborhood that has been on the market for more than six months. He says the property has had more than 20 showings and the price has already been reduced.
The slower pace comes as buyers have more choices and are taking their time.
"Buyers are very choosy and patient," said Andrew Abrams, who serves on the Market Trends Committee for the Denver Metro Association of Realtors.
Abrams acknowledged that higher interest rates can add thousands of dollars to the long-term cost of buying a home. But he said the rate increase is just one piece of a much larger affordability problem.
"The number is impactful, but it's not so hugely impactful that you're going to buy or not buy based on $800 a month, you know. I think the reality is, it's just the overall cost of living right now is expensive," Abrams said.
The impact also varies depending on the type of property as buyers weigh factors like HOA fees as well.
"The detached single-family home market is still moving relatively swiftly," Abrams said. "Attached multifamily properties, think condos, townhomes, row houses, and those are lagging dramatically."
Harcek said some buyers who have been considering a purchase may now decide to wait.
"For people who have been in the market and considering buying a home right now, this news and these increasing rates may be an absolute game over," he said of a buyer's decision to wait.
While higher rates could also mean fewer buyers competing for the homes that remain on the market, Abram's says it also means those buyers could be more serious about the purchase.
And for those still shopping, Harcek said buyers need to look beyond whether a home feels affordable today.
"Consider your options. Know that what you're buying may be a financial investment and act as such," Haracek said.
As for sellers, Haracek recommends owners hold on to property for a bit longer if they are able.
Experts also pointed to the country's debt and spending as factors that could keep rates elevated.
"The question isn't if rates will come down. You know, it's a matter of when. And the question is like, how much are you missing out on?" Abrams said.
For Denver metro area buyers, that leaves the decision to purchase in a market where borrowing costs, home prices, and the overall cost of living are all competing factors.
