Denver Real Estate Blog

I continue to run into clients that are sitting on the fence in the Denver Colorado region and waiting for the housing market to decline further prior to making a move. Last night I had the opportunity to work through the numbers with a potential buyer and we both realized that once we factored in another component of the buying process, home values should not be the only area of concern.

Although it’s great to buy Real estate when prices are falling, Mortgage rates will play a key role in determining what your true bottom line savings will be. Once again I’m going to refer to an article in the Rain City Guide that points you to a video that explains the recent excitement when were looking at Interest Rates. Rhonda has uncovered and article written by Dan Green of The Mortgage Reports and explains How Mortgage Rates Went From Riches to Rags in 30 Days. This does an excellent job of illustrating how fast interest rates can move in either direction and below I’ll map out the true impact to you as a home buyer.

As mentioned, last night when working numbers with a client who is looking at buying a home in Lakewood Colorado over the next 6 months and putting 20% percent down, he realized something that has created a since of urgency on his end. He’s been banking on home values to decline a minimum of 2% in the Denver Colorado market over the next year. That would equate to a savings on his purchase price of $6,000 if this prediction held true. Let’s breakdown what  the potential bottom line is when looking at his Mortgage payment if he bought today versus a year from now.

$300,000 Home Purchase Today

• Purchase Price = $300,000
• Loan Amount after 20% down = $240,000
• 30 Fixed Rate Payment at 5.5% = $1,362.69

Potential 2% drop in Home Values 

• Purchase Price = $294,000
• Loan Amount after 20% down = $235,200
• 30 Year fixed rate payment at 6% = $1,410.14

If you noticed we assumed a 1/2 percent increase in interest rates. Again referring to the article in Rain City Guide, this could be a very modest number and can change rapidly. When looking at this example, although my client would save $6,000 up front on the purchase price he would be losing $17,082 over the life of the loan or a net loss of $11,082. Although it was a late night, it helped with the decision process and we anticipate closing on his home within the next couple of months.

I do feel these are very modest numbers and as stated in previous post, the Denver Colorado Real Estate market is not forecasting the same trends that were seeing on a national level. Without question, now is the right time to buy and always have your thumb on the cost of financing a home.

If you have any questions about Real Estate in Evergreen, Littleton, Lakewood, Conifer, Golden, Genesee or the Denver Colorado area, please email me at DewayneDove48@msn.com.