The Federal Reserve announced last December 16 an increase in their interest rates. The said hike is generally expected to raise mortgage costs but experts are assuring prospective homeowners in Denver not to worry.
The upcoming months may be a great time to put their money into a home as they are predicting that the Fed hike will possibly bring the real estate market's supply and demand more into balance and that it could work in favor of investors.
Nick Stamos, CEO of Sindeo, an online mortgage provider forecasted, "As rates increase, home prices will begin to fall, which means that there will be more inventory, providing buyers with the ability to find the right house, at the right price, financed by the right mortgage."
Denver Metro Association of Realtors Chairman of the Real Estate Market Trends Committee Anthony Rael further explained that an addition of 500 to 1,000 more listings a month to the inventory of homes available for sale in metro Denver will give the industry a huge boost given how tight the supply currently is.
In a perfect world with stable interest rates and a balanced supply and demand in the property market, home prices should rise simultaneously with income gains.
Erik Franks, a research manager at John Burns Real Estate Consulting based in Irvine, California, said, "If a particular market is already overvalued with very low mortgage rates, when rates go up, they're going to feel the effects more."
He also cited some of the country's larger markets which enjoyed home price increases since 2001 because of rising incomes and lower interest rates. Among his list were Los Angeles, San Francisco, San Jose, Orange County, San Diego and Miami.
Denver was not included on the list despite being the leading city this 2015 for home price gains. Based on the data, Franks analyzed that Denver home prices are much ahead of the larger markets mentioned and therefore, can better absorb higher mortgage rates.
