Market Shifts as Interest Rates Limit Budgets
In May, Boulder real estate experienced greater balance as buyers adjusted to rising interest rates and sellers adjusted to a shifting market. While this change has attracted a lot of attention, it’s indicative of market stabilization and normalcy.
In the city of Boulder, 165 new single-family listings came on the market in May, up from 135 in April. We saw 97 homes sell and ended the month with 148 homes still available—a month-over-month increase but still well short of what's needed to achieve full balance.
Possibly due to more inventory, as well as high interest rates pricing out some buyers, competition eased and prices dropped from $1,853,544 in April to $1,767,782 last month. That's still 13.4% higher compared to the prior year, and single-family homes are selling, on average, for 109.3% of their list price.
As for the townhouse/condo market, prices rebounded after a March to April drop. The average price in May increased to $642,311 compared to $590,969 the prior month. While some of these properties are selling for over the asking price, there are well-priced gems available.
Looking at Boulder county as a whole, 512 new single-family listings came on the market in May, an 11.1% increase year-over-year. And the month closed with 377 active listings still available, leaving just 1.2 months of inventory countywide.
Prices for single-family homes actually decreased slightly from $1,207,090 in April to $1,143,416 in May. Again, year-over-year equity gains are still in the double digits, sitting at a healthy 11.4%.
Like the city of Boulder, townhomes and condos in the county experienced a price increase from $565,048 in April to an average of $597,097 last month. That's up 12.6% compared to 2021, but still a great opportunity for buyers who are budget-conscious but have their heart set on living that Boulder lifestyle.
Moving forward, one strategy that a buyer’s agent can help out with is focusing on the Tuesday market. With this approach, you wait and see what properties came on the market the week prior, made it through a weekend of showings and open houses, and weren’t under contract by Monday.
If you pay attention to what’s available on Tuesdays, before the next batch of new listings comes on the market, you just might find yourself with less (or no other) offers to compete with and a more motivated seller. Even with rising interest rates, you could find yourself a bargain.
As always, your best bet is to talk with a PorchLight agent who can advise you on when to make your move and how to submit a strong offer that takes into consideration rising rates and your budget. They can also connect you with reputable lenders who can get you the lowest possible rates.
To view our report on Boulder real estate market stats for May, click here.
The Effect of Rising Interest Rates
Over the last couple of years, many buyers remained on the sidelines waiting for the market to cool down—for more inventory to even out the playing field and reduce competition. While low inventory still remains, interest rates and therefore mortgage rates, have stolen the show in 2022.
At the end of last year, Lawrence Yun, Chief Economist and VP of Research at NAR, predicted that 30-year fixed mortgage rates could increase to 3.7% by the end of 2022–other forecasters predicted as high as 4% which matched the pre-pandemic rate. We are well beyond those estimates now and could go even higher in the coming months.
And it's not wildly out of line with past rates or indicative of the real estate market crashing. The historical average for mortgage rates lands right around the 8% mark. We've just had a highly unprecedented and unsustainable run over the last 2-3 years. If anything, the market is stabilizing.
Bottom line? Buyers who continue to "wait it out" only put themselves in a position to pay more—or wait forever while paying down a landlord's mortgage. Take a look at the chart below to see how different rates affect principal and interest payments for a 30-year, fixed-payment loan.