Montrose Market
Home sales in the Uncompahgre Valley are relatively flat from the same time last year. Mortgage rates are slightly lower from last fall though prices continue to persist upward. The median price of a home in Montrose hit $500K in September, with prices increasing 5.7% over the last 12-months. Inventory levels continue to skew as many homes listed on the market are TBD new construction. It’s still essentially a buyer’s market above $700K and a seller’s market under $600K. There also seems to be a lot of delay from consumers due to election concerns. We’re believing the ice will thaw once the election season is over and when rates begin to trend downward.
Mortgage Rates and the Economy
Last Friday’s job report produced one of the largest spikes in mortgage rates in one day. Mortgage rates jumped from 6.25% to 6.6% in a single day! That’s an increase of $100 per month on average for a typical home mortgage payment in Montrose Colorado. So why did positive economic news drive rates up? And why did the Fed’s decision to lower short-term federal funds rates actually have a nominal effect on mortgage rates?
As you know, mortgage rates are closely tied to the 10-year US treasury. Both long-term US treasuries (bonds) and mortgages (MBS) are considered safe places to park your money when things are looking gloomy. As we stand, the overall mood and consensus in financial markets is positive. Therefore, it costs more money (higher rates/yields) to encourage investors to buy mortgages and treasuries when the general view of the economy is sanguine. Essentially, positive economic news (like Friday’s job report) is driving mortgage rates up. Furthermore, the Fed’s rate decrease was already baked into mortgage rate expectations and consequently mortgage rates already reflected the rate decrease months in advance. Where we stand today, rates will most likely come down substantially if the Fed (and financial markets) believe a recession is near. And as long as rates remain at their current levels, expectations of a different housing market than what we’re presently experiencing seems hasty.
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