Rising mortgage rates failed to slow the surging single-family home resale market last month, according to a report Friday by the Pikes Peak Association of Realtors.
But a cool-down could begin this month, in part, because some buyers are finding themselves priced out of the market as a result of higher borrowing costs, some local real estate agents say.
The association’s report showed that area single-family home sales totaled 1,202 in July, a 23.5 percent increase over the same month last year and the first time sales reached 1,200 for any month since July 2006
Through the first seven months of the year, home sales totaled 6,538, a nearly one-quarter increase over the same period in 2012, according to the Realtors Association.
Meanwhile, the median price – or mid-point – for homes sold last month was $225,750, a 6.5 percent, year-over-year increase. July’s median price was the highest for any month in six years.
As sales and prices continued to rise, the number of homes being listed for sale jumped by 8 percent in July over the same month a year ago. It was the third straight monthly gain in inventory, and the first time that the home supply topped 4,000 since September 2011.
Inventory is on the rise as homeowners have seen the market rebound, and have decided the time is right to sell, said real estate agent Doug Barber of the Rawhide Co. in Colorado Springs.
Some of those sellers wanted to get out from under their homes in the past but couldn’t because the market was soft and prices were low. Instead, Barber said, they wound up renting out their homes.
“A lot of those people who are landlords now didn’t intend to be landlords,” he said. “They just couldn’t sell their house and they needed something to pay the mortgage with, so they became landlords.”
Now, as the market has improved, some of those rental owners are able sell but they might encounter a changing market, Barber said.
Sales always slow during the fall, but rising mortgage rates also could put a damper on the market, he said.
This week, 30-year, fixed rate mortgages averaged 4.39 percent nationally, according to mortgage giant Freddie Mac. That’s up from 4.31 percent the week before, and up a full percentage point from the first week in May.
Buyers looking to purchase homes in the $300,000-and-up range won’t be affected as much; those buyers can afford the slight bump in rates and monthly mortgage payments, Barber said.
“But maybe somebody at the low end, who’s trying to get into the market and get a house like a full-time buyer or somebody who’s coming off bad credit, it suddenly blows their payment where they can’t afford it,” Barber said. “They’re priced out.”
At what point would rising rates significantly halt the market’s momentum? Barber wasn’t sure, other than to say there will be an effect on all types of buyers as rates are on the way up.
“For every increase in the interest rate,” Barber said, “somebody will get priced out. That’s just axiomatic. Who knows at what rate people will go, ‘I can’t do it anymore.’ It’s a function of, if they can (buy), do they want to at the higher rate? But for other people, it’s a function of, ‘we can’t qualify now’.”
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