As we head deeper into the final quarter of 2024, mortgage rates remain a key driver shaping inventory, sales trends, and buyer behavior. In a recent Housing Wire podcast discussion featuring lead analyst Logan Mohtashami, the conversation unpacked the delicate balance between rates, inventory, and market demand. Here's what you need to know about how these dynamics might play out—and what it could mean for the Southwest Colorado real estate market.

Rising Mortgage Rates: A Double-Edged Sword

Mortgage rates have remained volatile, fluctuating around the 7% mark, with occasional dips toward 6%. Historically, such high rates can stifle buyer enthusiasm and slow down sales, but they also create opportunities for inventory to accumulate—a necessary element for stabilizing the market.

According to Mohtashami, the past year saw the lowest new listings data on record, following a sharp decline in the second half of 2022. As 2024 progresses, the key concern is whether more sellers will opt to “sit tight” until spring 2025 rather than listing their properties during the cooler months. This hesitation among sellers could reduce available inventory, especially as we approach Thanksgiving and Christmas—a period that naturally sees fewer new listings.

Inventory Levels: Closer to Healthy, but Still Not There

Mohtashami emphasizes the importance of returning to pre-pandemic inventory levels. He points to 2019 as a benchmark for healthy inventory growth—when listing peaks reached between 80,000 and 110,000 properties. While current inventory trends have shown improvement compared to 2023, we are still short of a balanced supply-and-demand environment.

Why does this matter? Because when mortgage rates inevitably decline—potentially in 2025—having enough inventory on hand will prevent a sharp spike in home prices. As Logan put it, “You want a better atmosphere when rates do fall,” ensuring buyers have enough choices and preventing frantic bidding wars.

What to Watch: October and November’s Inventory Trends

Southwest Colorado—much like other markets outside of Texas and Florida—has struggled with low inventory. Mohtashami cautions that some sellers may delay listing due to the current mortgage environment, choosing to wait until spring 2025. This could lead to an even tighter supply in the final months of 2024.

Increased rates may also influence sellers who had initially planned to upgrade homes. With financing costs higher, they might decide to hold off. As Mohtashami notes, many sellers are also buyers, and rising rates make it less attractive to trade up.

Jobs Week: A Key Indicator for Rate Movements

An essential event to track is Jobs Week, which will offer insight into labor market conditions and influence future rate decisions. The Federal Reserve closely monitors wage growth and job openings to gauge inflation trends. According to Mohtashami, if wage growth slows toward 3%, the Fed will likely feel comfortable maintaining or lowering rates. However, any acceleration in wage growth or job losses could prolong higher rates.

For homeowners or buyers contemplating mortgage decisions, Mohtashami recommends locking in rates rather than waiting for further declines. His advice? “Don’t roll the dice with interest rates—secure your rate to minimize stress.”

Southwest Colorado Real Estate: Takeaways for Buyers and Sellers

In markets like Durango, Pagosa Springs, and Cortez, understanding these national trends can provide clarity for local buyers and sellers:

1. Buyers: With rates hovering around 7%, it might feel discouraging, but keep an eye on winter inventory. Some sellers may lower prices, creating opportunities to negotiate deals before the spring market heats up.
   
   
2. Sellers: If you’re on the fence about listing your property, consider the advantages of selling now before more listings flood the market in 2025. Rates may drop next year, but buyers still need homes today, and fewer listings can mean less competition.
   
   
3. Investors: Pay attention to national labor reports and bond market movements. If rates begin to decline toward neutral policy levels in early 2025, investor demand for properties may increase, especially in vacation-heavy areas like Pagosa Springs.
   
   

Closing Thoughts: Looking Ahead to 2025

While the road ahead remains uncertain, it’s clear that mortgage rates and labor data will play a crucial role in shaping the market’s trajectory. As Mohtashami emphasized, the goal is not to chase down home price crashes but to monitor trends that can help predict where the market is headed. The Southwest Colorado market will benefit from careful attention to these national indicators, especially as we prepare for a potentially more active market next spring.

Stay informed and ready—because as Logan Mohtashami reminds us, “The trend is your friend.”

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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