That’s a tough question and to find the proper answer we did some research on the Estes Park Real Estate Market when the Housing Bubble burst in 2008 during the sub prime lending crisis. It’s all about supply and demand. According to the Estes Valley Board of Realtors there were about 233 Single Family Homes for sale at the end of 2008 and at the end of 2012 the number had dropped to 218. In 2012 the average price of a single-family home sold was $353,155 and it was $767,328 in 2019 or a 11.7% annualized increase. As of the end of 2022 there were 59 homes available for sale and that number is 141 as of the end of July. That’s a 31.8% increase over July 2022. Inventory has increased dramatically over last year, but well below the 2008 number of 233 and below the last non-covid year of 2019 which was 156 homes as of the end of July. Historically we are well below the average number of homes available for sale.
What does that mean? You may have heard the term “golden handcuffs” which refers to the owner of a home with an interest rate of 3.5% who is handcuffed from moving because the current rates are closer to 7.5%. So those feeling that they are handcuffed may hold off buying until the rate comes back down.
Industry experts say that we could see rates in the 6% range by the end of next year and they may even drop to the 5% range by the end of the following year. When the rate hits the magic level all those who have felt the rates were too high to make a move will now jump into the market. With our inventory being below historical lows, and this new influx of buyers who have been sitting on the sidelines, prices are bound to increase.
So far this year the median price of a home sold in the Estes Valley from January to July of 2023 is up by 1% over the same period last year. The Larimer County Assessor said that home prices in Estes increased 45% from July 2020 to June 2022. We may not see the historical price increases that the Larimer County Assessor says, but with the low inventory and the frenzy that will ensue when the rates do drop our prices are bound to go up. Well known Shark Tank star and Real Estate Expert Barbara Corcoran predicts that prices will rise 10-15% when this happens.
So, is it wise to wait to buy a new home until the rates go down? Let’s do some simple math. Using a home valued at $750,000 today, a 20% down payment amortized over 30 years at 5% interest yields a payment of $3,220.93. The payment is $3,991.81 for the same loan at 7% which is a $770.88 difference. Let’s say the rates won’t change significantly for 3 years so the total difference would be $27,751.88.
Let’s also assume that homes in Estes Park will continue to appreciate at the historical rate of 11.7% experienced in the 10 years from 2012 to 2019. That $750,000 house bought 3 years ago is now worth $300,000 more or $1,050,000. If appreciation is only half of the average, it would still be $150,000. Would you spend $27,751.88 to make $300,000? Another new phrase floating around the real estate industry is Marry the House and Date the Rate. In 3 years, you can refinance, or our lenders have many options to “buy down” the current rate for a few years and when they drop, and you can refinance. That does cost a little more, but it would have to increase a lot more before it would come close to the potential $300,000 in appreciation.
We at The Thompson Group love numbers and can help you calculate your potential gain in. Or we can introduce you to one of our great lenders. Let’s go grab a cup of coffee and we can help you calculate your savings or just catch up on the Broncos!
