As we enter 2024, our Team North Star experts are excited to share a recap of what the Southern Colorado Real Estate market experienced in the past year and our predictions for 2024. Lots in store for the year ahead!
Mortgage Rates
As predicted, the Durango Real Estate market saw some major interest rate fluctuations in 2023. Lenders started offering some popular new loan options to assist with the higher interest rates, such as 3-2-1 buydown, 2-1, and permanent interest rate buydowns. For those who aren’t familiar with these types of loan buydowns, we’re happy to connect you with some local lenders to discuss further!
Real Estate Market Slowdown
The Durango area has seen a bit of a standstill from both buyers and sellers. In fact, when the Wells Group recently ran the numbers, we discovered that we had the lowest real estate inventory since the mid-1980s! This downshift is likely because both buyers and sellers are waiting for interest rates to decrease. Buyers want lower payments, and sellers are more reluctant to sell when they either have a very low fixed-rate mortgage, or they can’t find something to replace their home. With such low inventory, there simply hasn’t been a lot to choose from.
We have many clients who are just waiting for the right home to come onto the market before making an offer. When a great home does get listed for sale, this can create a multi-offer situation with heavy competition because of the limited inventory.
Another common situation that we’re seeing is an influx of sellers listing their homes at a higher asking price. This phenomenon is largely due to sellers having seen the aggressive market prices of homes in the market two years ago. But these higher asking prices simply do not reflect the current real estate market. Inflated listing prices can lead to these properties being listed for longer periods, eventual price reductions which ultimately encourage aggressive offering and bidding wars, and in some cases can stigmatize the property.
However, when a home is priced more competitively, we are seeing close to full asking price offers and in some cases multiple offers. When a house is priced well, we tend to see it sell more quickly–usually within about 60 days–and in some cases with competitive offers. We are also still seeing a fair amount of cash buyers who are just waiting for the right house to get listed, and plenty of buyers who aren’t scared off by the current higher interest rates.
While rates are high compared to what we’ve seen in the past few years, rates are predicted to continue dropping and with much less competition we are once again seeing negotiations between buyers and sellers who are trying to reach a fair sale price. If and when the rates do come down, we predict this will encourage more sellers to list their homes, thereby increasing the inventory and attracting buyers back to the real estate market. With the competition rising, it may also bring back multiple offers, which could encourage the waiving of inspection objections, appraisal, and other sale-affiliated costs.
Upcoming Changes to the Real Estate Commission Structure
Anyone who plans to buy or sell real estate should understand the potential changes in the real estate commission structure. While it has been common practice in our area for sellers to pay the buyer agent’s commission, this may change in the coming year/s. Discussions are underway that eventually the buyers may instead be responsible for their brokers’ commissions. And a buyer’s agent commission cannot be part of a home loan.
To investigate this issue further, our team recently spoke with a few local mortgage lenders, who confirmed that (at the time of this writing) they cannot pay the commission fee. Sellers listing a property may lose a fair number of potential buyers if they do not pay the buyer’s agent commission. On the flip side, the buyer would need to come up with the buyer’s agent commission if it’s not paid by the seller. If this transpires in our market, buyers may start opting out of hiring real estate brokers, which can come with a lot of risk. Having the representation of a knowledgeable real estate agent is critical when buying or selling a property to help ensure that their party/ies are familiar with the right procedures and paperwork, and to help create the right conditions for a successful real estate transaction, such as:
- Ensuring proper inspections happen in a timely manner
- Using quality inspectors
- Making sure the home is up to code
- Ensuring that the home has a Certificate of Occupancy (if required)
- The septic system is up to code and transfers correctly
- To help de-stress the entire process, and so much more.
We believe that as a seller, not paying the buyer’s agent may lower the pool of people looking at your home. Fewer buyers could translate to less competition and possibly a lower sale price for your home.
We believe it is important to have representation on both sides to make sure that the transaction happens smoothly and properly from start to finish.
In the Future
We know a lot of buyers and sellers are apprehensive about the future of the real estate market, but there is good news. The Mortgage Bankers Association’s baseline forecast is for mortgage rates to end 2024 at 6.1% and reach 5.5% by the end of 2025, as Treasury rates decline and the gap between the two narrows. This is when we might start seeing more frequent 3-2-1 buydowns, as this type of loan option temporarily yields lower interest rates and is designed to give the buyers time to refinance if and when rates come down. This strategy is a gamble, but it offers an opportunity to buy a home when many other potential buyers may instead choose to wait for lower interest rates, possibly creating more competition in the real estate market similar to what we saw during 2021 and 2022.
Nobody knows exactly what to expect in Southern Colorado real estate, but we at Team North Star always have our fingers on the pulse of the real estate market and are always aware of current trends and projections. Our team has the knowledge and expertise to help you purchase or sell your home and are always happy to chat if you want to discuss how to prepare for buying or selling your Colorado real estate. Contact us today and start your journey.