Although I can give you a detailed list of reasons why housing under $400,000 in the Denver metro area has upside (no new construction coming online, better-than-average economy, growing population, $8,000 first-time buyer tax credit), there's one elephant in the room - at least as I see it - and that's higher interest rates.
In addition to the inflationary effect of $800 billion in government spending, Fannie Mae and Freddie Mac announced today that, in another effort to clean up their bleeding portfolios, loan fees will be increased across the board on April 1.
What that means to borrowers is that, in about six weeks, there will be a .75 point add on to the cost of Fannie or Freddie financing for any home purchased with a down payment of less than 25%. You likely won't pay the .75 point directly as a closing cost... rather, you'll see it "priced into the loan", which means it will make rates about 25 basis points higher than they otherwise would be.
On a $200,000 fixed rate loan amortized over 30 years, an extra 25 basis points pushes your P&I payment up from $1,167 at 5.75% to $1,199 at 6.00%. That $32 a month, times 360 payments, equals $11,520 in higher payments over the life of the loan.
I have said for a while that your best opportunity to take advantage of low rates and ample inventory is RIGHT NOW. And as I have said before in this space, rates are low because there is fear in the market.
If and when people's feelings about our economic situation change, rates are going nowhere but up.
