Is it a Good Time to Buy Real Estate Now in Vail, CO
Do you wait or do you not wait to purchase real estate in our amazing resort market of Vail? And that is the question on a lot of people's minds right now. Below is some good information to help make a sound decision.
Our resort market is completely different market than, an upscale, suburb of Chicago, for instance. The decision to buy a home or maybe wait to buy a home here in the Vail Valley, depends on a number of factors.
A chief economist from realtor.com, Danielle Hale says, it never feels like a great time to buy a home. You're committing yourself to paying an enormous mortgage over a really long period of time. It is a little bit scary even when the rates are good.
It's particularly scary right now at this very moment in. There are buyers out there who are positioned well to scoop up a great deal in our market, and they are poised to do so because of the fact that they are going to be purchasing their home in cash.
However, there are buyers out there in the Vail marketplace outside of the resort core, for instance, where there's a mixture of permanent and vacation homeowners that are actually lowering their expectations or they're going to be increasing their budget in order to meet their real estate goals. And for this reason, buyers may continue to sit on the sidelines for a while, and that's the reason why we are seeing mortgages applications slow down.
Here are some reasons for the slow down. The first one is high prices. In some cases, very high prices from two years ago. Less than two years ago, homeowners had the benefit of those incredibly low interest rates which were actually less than half a historic average.
The result was, bids that were coming in sometimes six figures over list price, and they were waiving all contingencies and they were putting escalation clauses just so they would not be outbid versus where we are today, which is a totally different market.
Surging interest rates is number two. And that is the reason why we are seeing our federal reserves, this is their way to bring down our country's runaway rate of inflation. Two years ago, the average rate on a 30 year fixed mortgage was less than 3%, and now nearly, and now today it's nearly 7%.
An example of what this means to the buyer out there. A family who's going to be purchasing an $800,000 home with 20% down. The monthly mortgage rate has jumped from $3,200 to $4,800. And the interest over the cost of the loan, where it would once be back in the day would be 308,000, now it's 848,000.
The smart buyer is possibly pausing on purchasing real estate right now. With borrowing being so expensive right now, why haven't homes lost value? Well, it's because we have low inventory.
Listings are way down. People who bought at a low interest rate a really long time ago have no reason to list their home because they don't have anywhere to go. Nor do they have an instrument to get them into something that is affordable. Low inventory just doesn't mean higher cost, but it also means less choice.
And for that reason, buyers are willing to wait in some cases for the right property to come along that's going to fit their lifestyle and their budget. Stock market decline is going to be number four. Stock markets, as we know, have taken an incredible hit. I mean, they have been getting hammered this past year especially in the tech stocks.
A lot of people jumped on, they made a whole bunch of money in those tech stocks and were breaking records but unfortunately after we saw that huge decline in our stock market, a lot of buyers actually use cash out of those stocks in order to fund their down payments and their closing costs to purchase homes. And with the decline in equities, the result has been buying a home that is much more expensive and less attractive. And for that reason, people are actually sitting on the side.
And the last reason is uncertainty. People are wondering whether we're going to be going into a recession or whether we're already in a slowdown. What that means is that there's going to be less people buying not just real estate, but across the board, and it could possibly be resulting in layoffs across our country.
Do people want to take the risk of putting out a huge down payment, taking on a very, very long mortgage payment only to find out that they can't afford to live in the area. Thus then having to try and sell in a market like this.
These are some of the factors that have slowed the Vail Valley market down. But as I said in the beginning, some of our visitors who are considering buying real estate in our ski towns are finding actually an exciting time because they are able to come to the closing table in cash.
An exciting closing that just occurred November 29th was a realtor closed a 40 million property. 30,000 plus square feet of living space. You can see some of the buyers who come into our resort communities, whether it's here, Aspen, Steamboat, winter Park, Breckenridge, they are poised and ready to close on property in cash because they are not affected by some of the factors that other people have to really consider before purchasing real estate.
So should you wait or not wait in buying a home? And the answer is it makes great sense for some of you out there to have your broker negotiate a great deal to achieve your real estate goals. For others, I may advise you to allow me to just keep you professionally informed and, and give you the real estate trends that are going on and when the time is right, that's when I would tell you to move on real estate.