Low interest rates lower your monthly payment.Let's say you are purchasing an average home in Denver County. In February 2020, the average sale price in Denver County was $524,640. Assuming a 20% down payment, at 3.29% your monthly principal and interest payment would be $1,836/month. Just a year and a half ago, in November of 2018, the average 30 year fixed rate interest rate was 4.94%. If interest rates were at the same level today as they were just 1.5 years ago, the principal/interest payment for the same loan amount would be $2,238--so at today's rate, buyers are saving $402 per month, $4,824 per year, and $144,720 over the life of the loan. To put this in even greater context, interest rates peaked in 1981 at 18.63%. At that interest rate, the average Denver home today would come with a monthly payment of $6,542/month--so at today's rate, you are saving $4,706 per month, $56,472 per year, and $1,694,160 over the life of the loan.
Low interest rates increase your purchasing power.A lower interest rate means you can afford a more expensive house. Let's say you can afford to spend $2,000/month on principal and interest. At 20% down with interest rates at 3.29%, you can afford a $571,553 house. If interest rates were 5%, you could only afford a $465,704 house. A small difference in interest rates means you can afford a house that is more than $100,000 more expensive.
We are currently experiencing incredibly low inventory and incredibly high buyer demand.In February of 2010, there were 10,124 homes for sale in Denver County and 625 sales (6% of the inventory). In February of 2020, there were only 1,893 homes for sale, and 947 sales (50% of the inventory). Sale prices have more than doubled in the last 10 years in Denver County, with the average sale price in February of 2020 being 116% higher at $524,640 than it was in 2010 at $242,915. Median days on market in February of 2010 was 56, and in February of 2020 it was just 12. In other words, homes are selling in one fifth of the time this year than they were ten years ago.
Seasonal demand has shifted.When there is low inventory and high buyer demand, multiple offer situations, or "bidding wars," often occur. Over the last 6-7 years, bidding wars have been most common in Denver in March-June. This year, we started seeing them in January. In 2019 the market was very hot for the first half of the year and cooler for the second half of the year. Peak sale prices occurred in May (meaning many of the homes sold then were listed in April), whereas ordinarily peak sale prices occur in June or July. In 2020, we saw the market heat up even earlier than last year, with the frequency of bidding wars that are happening now suggesting that the peak selling season for the year may be happening right now.
Contact us today to get the ball rolling on your home search and/or sale.