For Buyers in today’s Denver market, there’s a double whammy in delaying your home purchase.
As the graphic above reflects, each increase in the interest rate decreases the amount of house you’ll be able to afford for the same monthly payment. Framed another way, your mortgage payment will be higher for the same house as rates go up. The Fed has guided that they will increase interest rates a few times in the coming months, and mortgage rates will follow. Unless your income is rising accordingly, mortgage lenders are only able to make a loan commitment on your income to debt ratio. Or you’ll have to bring a larger down payment to the closing table.
The other factor in the affordability equation is the appreciating price of a home. As the supply of available homes remains very tight, we are experiencing continuous increases of listing prices. It’s a supply and demand issue – economics 101. Homes are selling within days! And with home construction unable to keep up with the demand, it will be a few years before we experience a more balanced Denver housing market.
The appreciation of sales prices is related to the pressure for properties “close in” to the employment centers, such as downtown, the DTC, and Broomfield. There’s only so much vacant land available on which to build, forcing developers to reach farther out with their new communities. That more remote land is certainly less expensive, enabling developers to make those homes more affordable. The cost of living farther out may be expressed in quality of life terms: longer commutes, less developed infrastructure (shopping, activities, culture), distance from your friends. There are many examples, and the years endured before life catches up. By then you may be ready for your next house anyway, based on your lifestage. Where do you want to be?