Home Prices Are Down, Mortgage Rates Are Dropping—Here’s Why You Shouldn’t Wait

As of August 2024, Southwest Colorado's real estate market presents a unique blend of opportunities and challenges for prospective homebuyers, particularly when considering the current mortgage rate environment. While the national average for a 30-year fixed-rate mortgage has dropped slightly to 6.35%, many buyers remain cautious, waiting for further declines. However, those who act now could benefit from a strategic move: buying now and refinancing later.

Why Buying Now Makes Sense

Yes, mortgage rates are higher than what we saw in the pandemic era, but they’re trending downward, and further reductions are expected after the Federal Reserve’s anticipated rate cuts this month. If you’re thinking about waiting for rates to drop, you could miss out on favorable home prices and inventory that may not be around in the coming months.

I recently closed on a property with a buyer that secured the property $135,000 under asking price along with a $15,000 seller concession. This buyer is saving approximately $700 per month on their mortgage based on our closing price. Now imagine this buyer closed on a 7% rate that they refinance to 5.5% within the next year, that brings them down approximately $800 additional dollars. 

Breakdown:

Purchase price of $1,185,000 at 7% 30y fixed
Estimated mortgage payment: $6,300

Purchase price of $1,050,000 at 7% 30y fixed
Estimated mortgage payment: $5,600

Refinancing of $1,050,000 to a 5.5% 30y fixed 
Estimated monthly payment: $4,800

This is where the saying “marry the house, date the rate” comes in. The idea is simple: you fall in love with the home you want to live in and commit to it, knowing that the interest rate you lock in today isn’t permanent. And while I typically do not advise this due to the concern that rates could always go up as well, in our current circumstance we have a clear indication from the Fed that they will be lowering the benchmark rates. When rates drop—as many expect they will—you can refinance, securing a better rate down the road. By taking advantage of today’s home prices and refinancing later, you can save money in the long term while still getting into your dream home now.

Active Listings and Inventory

Now, let’s talk about inventory. The Southwest Colorado market has seen a significant increase in active listings, offering more opportunities for buyers to find their ideal home. In August 2024, there were 1,273 active listings, up from 1,032 in 2023 and 958 in 2022. This 23% increase in listings from just last year means there are more options to choose from, less competition, and potentially more negotiating power for buyers.

The increase in inventory offers a rare opportunity in today’s market. For the past few years, many buyers found themselves in bidding wars due to scarce inventory. But now, with more homes on the market, buyers can breathe a little easier. You have more time to make decisions, compare properties, and negotiate favorable terms. With more homes available, sellers may be more inclined to accept offers below the asking price, particularly if their property has been on the market for a while. This is especially relevant when combined with the average days on market, which has extended to 92 days—a clear sign that buyers have time to strategize.

Average Home Prices

The shift in home prices also adds to the buyer’s advantage. Although home prices in Southwest Colorado remain high by historical standards, they’ve come down from the record highs we saw in 2022 and 2023. The average sale price in August 2024 was $847,097, a significant drop from $1.056 million in 2023 and $1.203 million in 2022. This decrease represents an opportunity for buyers to enter the market before prices potentially rise again, especially if lower interest rates drive up demand.

Despite these declines, it’s worth noting that home prices are still substantially higher than they were a decade ago. Back in August 2014, the average sale price was just $402,000. So while prices have come down from their peak, they’re still a reflection of the long-term growth and desirability of Southwest Colorado.

For buyers who have been waiting for a “perfect storm” of favorable conditions—this could be it. You’re seeing lower average home prices, increased inventory, and slowly declining mortgage rates. By purchasing now, you could lock in a great property at a reduced price and then refinance in the coming months when mortgage rates are expected to drop further.

What This Means for Buyers

This market presents a unique opportunity, especially in Southwest Colorado where the real estate landscape has shifted considerably over the last few years. Buyers have more homes to choose from, more time to make decisions, and a chance to benefit from both lower home prices and refinancing opportunities. Here’s the key takeaway: if you’ve been on the fence about buying a home, now is the time to jump in.

While mortgage rates may still feel high compared to the lows of 2020, remember that today’s rates are historically lower than past decades, and with predictions of future rate cuts, today’s buyers are in a position to refinance down the road. Additionally, the combination of increased inventory and a drop in average sale prices gives buyers negotiating power not seen in previous years.

The Southwest Colorado real estate market in August 2024 offers a rare confluence of factors that benefit buyers: falling mortgage rates, more homes on the market, and lower average home prices. While it’s natural to want to wait for the “perfect” time, keep in mind that today’s opportunities may not last long. Inventory could tighten, prices could rise, and competition may increase again as mortgage rates continue to drop.

Buy now, refinance later. It’s a smart move for buyers in Southwest Colorado who want to take advantage of current market conditions and set themselves up for long-term financial success. Remember: “marry the house, date the rate.” Don't wait too long—the perfect home could be out there now, and with the right strategy, it could be yours.

For further details on market trends and to explore opportunities in Southwest Colorado, feel free to contact me. Let’s navigate these changing times together and find the best deals tailored to your needs.

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