Rising interest rates hit hard for some Steamboat homebuyers

Popular entry-level properties such as Whistler Village Townhomes were selling within five days at above asking price until interest rate increases drove some buyers out of the market. Now the units, such as this one priced at $548,000, are staying on the market 31 days before closing. With rising interest rates, fewer buyers can afford their targeted price range.
Suzie Romig/Steamboat Pilot & Today

Many would-be homebuyers were already priced out of Steamboat Springs, but the increase in mortgage payments the past few months has made it harder to buy in Routt County for many more people.

Doug Labor, a broker with Steamboat Sotheby’s International Realty and local real estate statistics expert, explained how monthly payments for some of the most sought-after affordable properties in Steamboat have almost doubled, which he considers “startling” and “very concerning” for buyers.

Mortgage interest rates have increased by approximately 2% since the start of 2022, jumping from approximately 3.5% to 5.5%, in an attempt by federal officials to tame the economy’s rapidly rising inflation rate.

At the same time, the price of housing in Steamboat is still going up, although not at the same rate it has over the past two years, Labor said.

Variations in the market and interest rates are piling on stress for local homebuyers.

Modesty and Matt Martinez in Steamboat recently missed purchasing a property with acreage in Oak Creek when their mortgage payment was going to double.

“Due to the interest rates, we can’t buy that place,” Modesty said. “We did have to start looking at different price ranges to accommodate the increase in mortgage rates. It was much more stressful than expected.”

One type of housing in Steamboat that has increased more than other categories is the bottom 15% price point that includes townhomes and condos, which has risen some 42% since 2021, Labor said.

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An introductory condo that had a median price of $299,500 in early 2021 could now be on the market for $425,000. Add that price hike with the increase in borrowing rates, and the monthly payment on 30-year fixed mortgage for a $382,500 loan with a 10% down payment has gone from approximately $1,210 last year to $2,172 this year, Labor explained.

Essentially, the 2% mortgage interest rate increases through the first six months of 2022 adds $119 per month per $100,000 of loan payment, Labor said.

Labor’s example provided earlier this week does not include the Federal Reserve’s decision to raise the interest rate another 0.75% on Wednesday, July 27.

“While the number of transactions is diminishing, the purchase price of the properties is still increasing, especially in those markets where property is finite,“ said Kendra Thomas, team leader at the Land Title Guarantee Co. in Steamboat. “The resort markets have seen a reduction in purchase transaction orders over the last one to two months.“

Labor agreed that the limited housing supply with fewer listings on the market has kept house prices increasing gradually.

“Due to a lower housing supply compared to the first half of last year, it slowed down our sales so far this year,” Labor said. “The marketability of a house is being reduced because not as many people can afford it. So, you are not getting multiple offers like you would before.”

Units at Whistler Village Townhomes are in the lowest 15% of the Steamboat real estate market cost-wise, a highly-sought after price point that has risen in price by 42% in the last year.
Suzie Romig/Steamboat Pilot & Today

The National Association of Realtors reported last week that existing-home sales dropped for the fifth straight month in June with sale decreases of 14.2% compared to one year previous in June 2021.

The median existing-home price for all housing types across the U.S. was $416,000 last month, according to the association. That represents a 13.4% price increase from June 2021.

Prices increased in all regions in the U.S. and June marks 124 consecutive months of year-over-year increases, the longest-running streak on record, according to the national association.

Realtor Marci Valicenti, co-owner at Colorado Group Realty, said limited inventories have made it very difficult for many local buyers.

“The last few years the lack of inventory has gotten pretty critical,” Valicenti said. “The increased interest rates have now eliminated some would-be homeowners to continue to be renters. The entry-level buyer has been hit very hard by the rapid increase of interest rates and lost affordability.”

Thomas at Land Title noted “cash is still king in most resort markets,” so that means first-time and lower-income buyers are at a disadvantage if competing for the same property against cash offers.

She said the percentage of cash transactions by county for June 2022 included 42% in Routt County, 43.5% in Eagle County and 44.6% in Grand County.

Labor still advises committed buyers to move forward, though.

If somebody looking to buy a property today finds the right house and it’s reasonably priced for our market, I would advise them to make the purchase because it appears the market still is going to appreciate from lack of supply. And there’s not a return on investment for renting.”

Valicenti too is recommending home purchases currently, and she suggests buyers watch interest rates and be ready to refinance in one or two years.

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