At the beginning of 2022, the real estate market ruled in favor of sellers, as there was a low housing inventory. Ultimately, it led to buyers paying higher prices and houses coming off the market much faster. However, around the middle of the year, mortgage rates jumped up to 5.10%, leading to monthly payments jumping up 27% overall.
As the end of 2022 quickly approaches, many financial institutions predict mortgage rates to rise and sit between 5-7% on average. With mortgage rates continuing to climb, fewer people are buying houses, another trend that will majorly impact the real estate market through the end of this year and into 2023. As a result of these higher rates, there are more houses on the market, and sellers may have to lower their asking price.
Growing inventory and houses remaining on the market for longer are typical for higher mortgage rates. The question is, how does this impact the real estate market in Castle Rock, Colorado? Before further analyzing these trends, it is crucial to understand the current market further.
Mortgage rates and the current market
In the Douglas County real estate market, there is a decrease in houses sold and listed during September of this year compared to September 2021. Not only are there fewer listings and sales, but these houses spend more time on the market. On average, in September of 2022, homes were typically on the market for 34 days compared to only 15 days in 2021.
However, compared to the Castle Rock real estate market, there appear to be similar trends within the market. There are more Castle Rock houses for sale compared to 2021, as there were only 187 active listings last year compared to 294 this year. Homes also stayed on the market for almost twice as long as last year. The only difference, though, is that the average sales price for houses in Castle Rock increased by 3.5%. Although the increased amounts of inventory and homes spending more time on the market indicates more of a buyer's market versus a seller's market, both Douglas County and Castle Rock are experiencing an increase in average and median sales prices for homes in the area. Despite the price increases, other conditions are pointing toward the housing market leveling out by the end of 2023.
The steady incline of housing prices over the past couple of years and the market favors sellers are finally coming to an end as the market begins to rebalance. Several conditions are coming into play during this process which will eventually turn the real estate market to favor buyers.
Higher rates lead to less competition
One way higher mortgage rates play a part in rebalancing the real estate market is the decrease in potential home buyers. Since it is more difficult to afford a home when the mortgage rates are higher, fewer buyers will be interested in buying a home. Although this sounds as though it is a disadvantage, higher mortgage rates actually can still benefit buyers. Higher mortgage rates mean less competition between current home buyers over the available housing inventory. Less competition among buyers leads to more competition among sellers, causing housing prices to decline.
Even though the offer price will be lower for home buyers, it is necessary to consider the amount of money you will be paying monthly for your mortgage.
More inventory leads to a buyer's market
As was previously mentioned, less competition among buyers causes more competition among sellers, as there will be more considerable amounts of housing inventory. It also means that with higher inventory levels, houses will spend more time on the market, as can be seen in Douglas County and in Castle Rock even now. Sellers wanting to sell their houses are likelier to accept lower offers from home buyers and their real estate agents. With more inventory, houses spend more time on the market, causing sellers to accept lower bids. These conditions define what is known as a buyer market, where the real estate market favors home buyers over sellers. Experts predict that 2023 will be a balanced market.
How this affects your home search
Since the higher mortgage rates are likely to cause a plummet in potential homebuyers, sellers will be more desperate to sell their homes. An increase in homes for sale leads to houses spending more time on the market, causing more competition among sellers. This particular set of circumstances is setting the real estate market up to begin favoring buyers, despite the increase in mortgage rates. The question remains: will the higher mortgage rates benefit buyers as sellers are more likely to accept lower offers? Or will the higher rates counterbalance any lower offers?
Questions like these are a few reasons why it is good to work with a real estate agent, as the market resets itself after favoring sellers for so long. An agent helps you get the best home offer and can utilize their network to find a financial expert to help you prepare to buy a house. They also possess local knowledge about the area. For example, real estate agents in Castle Rock can tell you about the cool places to visit in downtown Castle Rock such as Ecclesia Market.
Anyone looking for their dream home in the town of Castle Rock should contact Brian Grimm today. With years of experience in the real estate business and over 20 years of residency in Douglas County, Brian has the real estate knowledge and local insight to find the best home for you in Douglas County. Contact Brian Grimm today to find your perfect home or investment property.
