Introduction to Colorado Springs Real Estate Market something strange is happening in the Colorado Springs real estate market and it's not what most people think it is people have been in fear of a housing market crash for years and have we finally bottomed out if you're thinking about investing in the real estate market then you need to watch this video fully to understand what's really going on in the Colorado Springs housing market my name is Iris and I'm your Colorado real estate resource and I July 2024 Real Estate Statistics recently ran some numbers on the real estate market stat in just Colorado Springs alone so I didn't include any other suburbs in the C County like fountain or Payton but strictly Colorado Springs the real estate stats for the month of July was unique in five different ways for the entire month of July existing home sales in 2024 in Colorado Springs were around 776 total sales when I changed the data set to July of 2023 it was around 795 so a little bit of a decrease in available homes for sale and homes were selling around $99 to 100% which hasn't really changed over the last several years but the days on the market did go up about 4 days from 28 to 32 for when we're comparing last year in July to this year in July and the median home price has actually shot up $220,000 whereas last year it was at $450,000 for the median home price in Colorado Springs can you believe that in July of 2016 there were 1,2 276 homes that closed in the month of July that is significantly more than what we're looking at here and even back in 2016 the inventory was beginning to get tight even back then I bought my house in 2017 and I felt so much pressure and I didn't feel like there were a lot of options and all the good homes were getting snatched up so quickly the average days on the market was 23 which may not be covid numbers but that's still way less than what the average is when you're talking 40 to 60 days over the last decade or so now if you're an existing homeowner who bought in 2021 or later you probably have little to no equity which makes sense because you literally bought at the height of the market and because interest rates have doubled or more since that time when you bought it leveled home prices slightly but the numbers were just surprising with the high prices even with the high interest rates people are still buying homes and the days on Market have not really changed a whole lot now this really got me thinking about the future of the real estate market bank rate recently came The Lock-In Effect Explained out with an article about how the lockin effect is keeping homes off of the market so listen to this the annual pace of existing home sales jumped at the beginning of 2024 but remains far below typical levels so like I said even in our Market it actually didn't jump the lock and effect continues to suppress existing inventory levels as a lot of homeowners remain unwilling to sell their home to buy a new one at a higher price and with that higher mortgage rate this is coming from Bob brmi the president and CEO of the Mortgage Bankers Association now as mortgage rates hit record lows in 2020 and 2021 a lot of homeowners took advantage and refinanced their loans me being one of them and so I'm going to tell you a quick story about my situation where I would never sell my house because I have such an amazing interest rate my payment would probably double if I were to buy another house right now and the new house that I would be getting is probably going to be pretty average it's not going to be as nice as I would want to if I were going to sell an upgrade meaning I wouldn't get much more house for basically twice the payment and so that's why homeowners are so hesitant to sell because of this lockin effect what is the lock in effect well I'll share exactly what that is and how it's crushing the real estate market I try to put myself in the mind of a typical seller with a 3% interest rate and for me to give up that rate someone would have to offer me enough money a ton of money to make it worth it otherwise I'd rather just stay here and maybe just work on some remodeling maybe update paint and do some things that make me feel like I have a different house but it's really the same house right I'm perfectly content in my home I might want a bigger lot just because my neighbors dogs are incredibly annoying and I just want more privacy but is that worth taking on more monthly debt probably not and that's how a lot of homeowners are thinking right now so Impact of High Mortgage Rates the lock and effect refers to the reluctance of homeowners to sell due to a significant rise in mortgage rates since the pandemic now in early 2021 the average 30-year mortgage rate was 2.93% but by late 2023 it soared to 8% and now remains above around 7% so many homeowners secured mortgages below 4% making them unwilling to move and give up their low rates understandably so so this is resulted in fewer home sales and the existing home sales dropped nearly 6.5 million in January nationally to below 4 million by December of 23 so what are the causes of the lock and effect again we talked about this earlier High mortgage rates are the primary cause with a 2023 Fanny May survey revealing that 21% of homeowners stayed put due to Rising rates other reasons include satisfaction with their current home high home prices and Job and Family Ties tax policies also contribute specifically in States like California and Florida where property tax increases are limited discouraging homeowners from moving and Rising home values have led to potential capital gains taxes making selling less attractive this is a huge impact on home buyers and home sellers homeowners benefit from substantial savings by retaining those low mortgage rates averaging $511 monthly savings and a cumulative $3 trillion in total savings and in a tight economy most Americans would rather keep every dollar that they earn and in that same vein moving is even more expensive and could result in nearly a 40% increase in mortgage payments so the lock and effect has led to reduce home sales preventing 1.33 million sales between mid 2022 and the end of 23 now this situation has slightly increased home prices nationally 5.7% and here by 20 grand and even though higher mortgage rates have tempered this effect by reducing prices 3.3% it hasn't really reduced prices here in Colorado Springs so let's see how this affects your money over the life of the loan let's say you have a $500,000 loan amount at a 7% interest rate that's about the average home price in color springs so we'll just use that number let's calculate the total interest paid over the life of a 30-year mortgage for that specific home I pulled up a monthly mortgage payment calculator for 30 years and at a payment of $3,200 per month multiply that by $360 months the total interest paid over the life of the loan would be approximately 66 $62,000 and this is assuming that you're not making any additional principal payments just an interest alone now that same scenario with a 5% interest rate over 30 years would be about $ 2,684 per month based on National averages of a well-qualified borrower so the total interest paid over the life of the loan would be approximately 466,000 and some change now this is significant ific when you compare these two numbers and that's why buyers aren't buying and that's why you're probably feeling the pressure as a buyer right now but hold on not all hope is lost Strategies to Lower Your Mortgage Rate there are some ways to hack the system to get that rate down to something that is more affordable and more comfortable for you per month the first thing that you're going to want to do is raise your credit score now this one seems pretty obvious but the better your score is the better rate that these lenders are going to give you so if you've been hovering ing around under a 700 credit score now is a good time to get with a financial adviser or just you could even YouTube this stuff and start figuring out ways to fix that credit don't close any accounts do the snowball method where you can just pay off your smaller cards first if if it's a debt issue and then from there just start paying off all of your bills and get caught up number two is to shop rates not all lenders are the same you can price out different lenders and often times they will will try and switch it up on you offering one rate but then changing it up so make sure you get that in writing and get all the docs to them as soon as possible um so that they can run your credit and give you an accurate credit score because they have to every situation is different and they have to go through your personal situation your personal finances um all your reserves and take a look at how much of a risk it's going to be and how much they're going to charge you um for that I'm not a financial adviser so I can't go too deep into that with you all I know is that for us when we shopped rates we were able to pick the lender that was going to give us the best rate and the best in the best monthly payment without charging us a ton of fees so you also have to look and see how much they are charging you um to get those points down number three you can look into bank nonprofit loans which may require you to buy in a specific area but use that as an entry point to get into your first home or just to get a house that you can leverage later on live there a few years and then use that home to either rent it out or you can sell it to get your next home the Bible says do not despise Small Beginnings and so I think if more of us started looking it that way you're going to be living in that house time's going to go by and um it's okay to live in a starter home for a while number four you can do a seller buy down if you find a house that's been sitting on the market for a little bit and the seller is motivated to sell they may be interested in helping you buy down those points to get you down to a more comfortable payment a lot of new construction homes are doing this to help buyers get into an affordable monthly payment so it's not always about price if you can try and see if the seller will contribute maybe a seller concession maybe $5,000 to help buy down those points it could save you a lot of money later down the line in interest and a lot of lenders and agents are suggesting that you can get into the house at that higher rate and then just refinance as rates go down but if you've had any experience with that yourself the last year the rates have not gone down they've just continually climbed up so that could be a risk for you so it's something that you can consider but think about the arm and how that uh arm balloons and it's it's too risky those are these types of loans um if you can't refinance or even if you can refinance um a lot of lenders are offering a free refinance but you still have to pay all the closing costs so um you just have to think about your situation and what's going to work best for you and number five I kind of touched on it just a little bit above about buying new construction if you buy a new construction home they're able to offer lower rates and that helps you get your monthly payment down some are offering up to 4% that you can use back towards your home purchase and you can use that for closing cost you can use it to buy down rates or you can take it off the purchase price which the purchase price doesn't really make that much of a dent in your month mon L payment I think I was told probably for every 10 grand it's only about $50 off your monthly payment if that these days so I highly recommend that you use it towards closing costs or to buy down that rate Upcoming Changes in Real Estate Agent Fees so now that you know more about the housing market and how to get ahead of interest rates you may need to know about this major change about how real estate agents are getting paid going forward the Department of Justice wants buyers to pay their own buyer agent fees from now on so on top of all of that rates and high prices have to pay your own buyer agent so how does that affect you as a home buyer make sure you watch this video next to find out listen if Conclusion and Contact Information you need help navigating any of the real estate market please feel free to give me a call text or email my information will be below on the screen and you can book a one-on-one consultation with me a free 15minute consultation thanks for watching and I'll see you on the next one