Will higher interest rates, continued low inventory hamper summer home buying?

Summer is traditionally a busy time for buying and selling homes. Many families choose to relocate while school’s out.

Warmer weather also makes it easier to move.

According to Zillow data analyzed by MovingFeedback, an online resource that helps connect people relocating with moving companies, July is typically the busiest month for home sales in Colorado.

But after struggling with months of historic low inventory, higher interest rates, and rising prices, will the summer season return to something resembling the norm for potential home buyers?

Limited homes available

Buyers have struggled this year with a limited number of available homes. And that’s unlikely to change soon.

In the June Market Trends Report from the Denver Metro Association of Realtors, Steve Danyliw, a past chairman of DMAR’s Market Trend Committee and Realtor, said that home sales dropped much more sharply in the first half of the year than forecast.

“Our housing market continues to navigate uncertain terrain as we strive for stability,” Danyliw said. “Buyers, sellers and the industry that serves them will need to exert greater effort in finding viable patterns to successful transactions. The encouraging news is that in the face of adversity, our industry has consistently demonstrated its ability to adapt and overcome challenges.”

Interest rates

Buyers who purchased or refinanced homes before interest rates started climbing in 2022 have little incentive to sell now, with rates hovering around 7%.

Nationally, 91.8% of U.S. homeowners with a mortgage have an interest rate below 6 percent, 82.4% have a sub-five percent rate mortgage, 62% have a sub-four percent rate, and 23.5% have a sub-three percent rate.

“The influence of mortgage rates on our housing market cannot be overstated,” Danyliw said.

“The past 18 months provided a notable illustration of this relationship. At the beginning of 2022, mortgage rates hovered around 3.3 percent and by the start of the fourth quarter, rates passed seven percent. Since then, rates have fluctuated between 6 and 7 percent causing our housing market to slow.”

June sales data

June saw home and condo sales dip in the Denver Metro area, with 4,109 units sold compared to 5,472 during the same month last year. The number of days on the market increased from 6 to 7.

But the median close price increased to $600,000 from $593,00 in May, with sellers securing roughly 100% of their asking price.

Libby Levinson-Katz, DMAR Market Trends Committee chairwoman, said discerning buyers aren’t engaging in bidding wars.

“Some homes are selling in a weekend with multiple offers, but many more are sitting on the market for a few weeks with one or two price reductions before finding a buyer,” she said.

“The days of routinely putting a home on the market and watching it sell to the highest bidder in days are gone.”