A person sitting at a computer with a smartphone and checking interest rates

What’s going on with interest rates in 2023?

In Buyers, Homeowners, Sellers by Doug Phelps

The last few weeks we’ve focused on metrics and analysis of market performance in 2022 and what 2023 might look like for both buyers and sellers, novice and experienced. No matter which category you might find yourself in this year, rest assured that I am here to help with your buying or selling process and any general questions you have. That being said, a hot topic right now is that of interest rates. Interest rates are something that industry professionals and homeowners alike are watching very closely right now. There are a lot of questions about rates right now and I’m happy to dive into this complex topic.  

How do higher interest rates affect real estate?

Simply, interest rates influence how much a mortgage is both in a lifetime and a monthly payment. In the last few weeks of January 2023, we’ve seen interest rates hover around the upper-5% to lower-6% range for a 30-year fixed rate mortgage. A pleasant improvement from the 7%’s we were at late in 2022. This after the Federal Reserve raised short-term rates to slow inflation – defined as too much money chasing too few goods – in the second half of 2022 and into the new year. We’ve also seen layoffs in the mortgage industry indicating that there is some slow down as buyers shy away from signing up for a 30-year mortgage at a higher rate, and refinancing is slow right now too. Overall, it is no surprise higher mortgage interest rates slow down the real estate market in Metro Denver and nationwide.

Do interest rates affect cash buyers?

It would be assumed that cash buyers don’t worry about interest rates as they don’t have to go through a traditional financing experience, but this isn’t necessarily true. For example, cash buyers who are buying as an investment property may be concerned about interest rates if they ever plan to put a mortgage on the home. Cash buyers may opt to do this later as a way to generate cash for other investments. A cash buyer may also be concerned about interest rates if they are concerned about forgoing interest income. 

Is now a good time to buy a home?

As we’ve discussed in the last few weeks, January typically brings a higher inventory in the housing market as some sellers wait for the new year to list their home as opposed to over the holiday season. A higher inventory typically means a better value for their dollar for buyers. So this simple supply and demand ideology means that now is a decent time to buy a home regardless of those higher interest rates. The reason being is that a buyer can always refinance in the coming months or years when interest rates lower. Remember, a high interest rate now doesn’t mean the rate has to stay high over the life of the mortgage as refinancing is always an option. And it can be done multiple times as desired.

Is now a good time to refinance?

Depending on your budget and financial comfort, many mortgage professionals recommend refinancing when you can change your rate by 1-2%. If rates are hovering around the mid 6% range, unless your mortgage rate is currently at 7% or 8% then it is not ideal to refinance right now and you’ll want to wait. Interest rates greatly impact the refinance business, even more-so than the real estate market as a whole. 

When will interest rates lower?

This is THE question on most people’s minds right now and while there is no solid answer, some professionals anticipate a lowering of rates as we get into the summer months of 2023. They are in a decline now as I reported in a previous post. Overall, I watch the rates and overall market trends closely and I’m happy to keep you all updated. The key thing is to watch the core Consumer Price Index (CPI). The updates of this are in the middle of each month. My eyes will be watching for the May 10 update.

Do you have any lingering questions on interest rates? Are you in the market to buy or sell your home?  Call and text me at (720) 323-4176 or email me at [email protected]