How will mortgage rate increases affect real-estate sales in Durango and La Plata County? Well, that depends, says Alpenglow Properties' Dan Korman.
Hi there, my name is Dan Korman, and I hope that you've had a great first half of 2022. It's been a while since my last video, so today, we're going to discuss what's been happening this year now that Q2 has come to an end. This is the Durango Real Estate Update. Let's get into it. It is mind-bending to think about all of the things happening in real estate right now. So we're going to unpack the second quarter year-to-date statistics as well as a couple of other major headlines in this episode. The most questionable component of the market right now is what mortgage rates will do, given the unprecedented increases this year. If you have been on the house hunt since January, you've been struggling with an inventory drought similar to that of the north shore of Jacinto. And now, to add insult to injury, not only do you have to deal with a dwindled supply, though we will speak to the inventory up swings later in this video; you have to deal with a full two to three percentage points of mortgage rate increase to contend with. For the average buyer, the mortgage rate increase is translating into a major decrease in your purchasing power. And with pricing the way it is, that affordability is starting to be out of reach as it can be. The good news is that as of this taping, interest rates have dropped from their high of 6.3% back down to 5.7%. But given the Fed's most recent statements, I expect to see those increases at least two more times this year, with a rate in July bumped by 75 basis points before the months end. This stuff is hyper-boring, so I'll spare you any further interest rate talk. But if you ever want to chat about the Fed, the bond market, and/or its correlation with interest rates, shoot me a message down or comment below, and we can nerd out together at length. Something a little more uplifting. This has been the increase in available housing supply this summer. Sure, money's more expensive than it's ever been lately, and list prices are still bananas, but the bright spot here is that with more competition comes more opportunity. The single-family home inventory is still well below pre-pandemic levels, but the active single-family home listings in Durango are up 18% year over year, though new listings in the county for June were down almost 14% year over year. This leveling-off has created more opportunities for buyers to take a deep breath and actually see more than one house prior to getting into a bidding war this summer. Take a look at this graph showing historic new listings by month. As you can see, the highest amount of new listings typically hit the market in May each year, and the lowest numbers tend to land in the post-holiday winter months. This summer's housing activity was consistent with my predictions earlier this year, as we did indeed capture the seasonal uptick. But notice that the peaks are trending lower and the troughs will be seemingly be deeper this winter, though, and an anomaly could persist in the event interest rates skyrocket. Sales data for the second quarter year-to-date aren't quite as rosy. The numbers of single-family units sold in the first half of this year is down 20% in the county and 31% inside Durango city limits. And for the month of June alone, year-over-year, the sold units in La Plata County were down 44%. This is highlighting the persistent inventory shortage. The crazy thing is that sales volume by dollars is only down by 3.4%, highlighting the 20% home increases. The median price for a single-family home in our area has peaked, with Q2 2022 seeing historic medians of $720K for LPC, $718,000 for in-town Durango, and a whopping $530,000 for a home in Bayfield when looking at both in-town and rural combined. A 30% increase compared to the medium price of the first half of 2021 for Bayfield. The saga that is the real estate market will continue into the winter, but my hopes are a continued leveling off. I predict that an increase in interest rates will further slow down the number of sales, which could lead to more opportunities for buyers around the holiday season. It's anyone's guess where this could go, and I'll continue to keep an eye on the markets and disseminate any and all information to you accordingly. I always thank you for watching the Durango Real Estate Update. And as always, you can reach me at my email address at Dan@AlpenglowProperties.com or on any of our social media handles, @DurangoBrokers. Go out and smile at a stranger today and enjoy the rest of your summer. We'll see you next time.