Is Now a Good Time to Buy a Home in Colorado?

If you’re thinking about buying a home in Colorado, you may be wondering: Is now a good time to buy, or should I wait?

There is no perfect time to buy a home. The right time depends on your finances, how long you plan to stay in the home, and whether you can comfortably afford the monthly payment.

However, today’s Colorado housing market may create opportunities for buyers that were much harder to find during the buying frenzy of the COVID years.

What Happened to Colorado Home Prices?

During the COVID-19 pandemic, many people moved away from large cities and looked for homes with more space, larger yards, and more room between neighbors.

Colorado became a popular destination.

As more buyers entered the market, demand increased dramatically. In many areas, buyers competed against each other and offered more than the asking price. This created bidding wars and pushed home prices higher.

In some cases, homes sold for more than their appraised value.

That rapid increase in prices could not continue forever. When mortgage rates began rising in 2022, monthly payments became much more expensive. Many potential buyers could no longer afford the prices they had been willing to pay just a few years earlier.

The result was a significant slowdown in the housing market.

Why Higher Mortgage Rates Matter

The price of a home is only part of the cost of buying.

Your mortgage interest rate can have a major effect on your monthly payment.

For example, a buyer who could comfortably afford a certain home when mortgage rates were low may no longer be able to afford that same home when rates are significantly higher.

This has changed the balance of power between buyers and sellers.

During the housing boom, buyers often had to compete with multiple offers. Today, buyers in many Colorado markets may have more negotiating power.

More Choices for Buyers

One of the biggest advantages for today's buyer is choice.

There are homes available that have been sitting on the market longer than they did during the COVID-era buying frenzy.

That doesn't necessarily mean something is wrong with these homes.

Sometimes the home is perfectly fine. The problem may simply be that buyers are concerned about today's mortgage rates and monthly payments.

This can create an opportunity for a buyer who is financially prepared.

Instead of competing with several other buyers and offering thousands of dollars over the asking price, you may be able to negotiate with the seller.

Don't Just Negotiate the Price

Here's something many first-time buyers don't realize:

You don't always have to negotiate only on the purchase price.

Your real estate agent may be able to negotiate for the seller to provide a seller concession that can be used toward certain closing costs or an interest-rate buydown, depending on the loan program and lender rules.

One possible strategy is a 3-2-1 mortgage rate buydown.

With a 3-2-1 buydown, the buyer's effective interest rate is reduced during the first three years of the loan. The payment is based on a rate that is generally:

• 3 percentage points lower during the first year
• 2 percentage points lower during the second year
• 1 percentage point lower during the third year
• The full mortgage rate applies beginning in the fourth year

The seller may agree to pay the cost of the buydown as part of the negotiated transaction.

However, a 3-2-1 buydown isn't right for every buyer or every loan. Your lender should explain exactly how it would affect your payment and total costs before you make a decision.

What If Mortgage Rates Come Down?

This is where buying now could potentially make sense for some buyers.

If you purchase a home at today's higher interest rate and mortgage rates fall in the future, you may have the option to refinance, assuming you qualify and refinancing makes financial sense at that time.

But there is an important point to remember:

Nobody knows exactly where mortgage rates will be in the future.

You should buy a home because you can afford it today—not because you are counting on refinancing later.

What Happens If Mortgage Rates Fall?

Lower mortgage rates can make homes more affordable on a monthly-payment basis.

But there is another side to the equation.

If mortgage rates fall significantly, more buyers may enter the market. Increased demand could put upward pressure on home prices.

In other words, waiting for lower rates doesn't necessarily guarantee that you'll get a cheaper home.

You could potentially face a different problem: lower interest rates but higher home prices and more competition.

So, Is Now a Good Time to Buy?

For some Colorado buyers, yes.

If you have stable income, good credit, enough money for your down payment and closing costs, and a monthly payment you can comfortably afford, today's market may offer advantages that weren't available during the housing boom.

You may have more homes to choose from.

You may have more time to make a decision.

You may have more negotiating power.

And you may be able to negotiate with the seller for concessions that can help reduce your upfront costs or your mortgage payment during the early years of the loan.

But don't buy simply because you think prices have reached the bottom.

No one knows exactly where the bottom of the market is until after it has passed.

Instead, focus on whether the home is right for you and whether you can comfortably afford it.

The Bottom Line for Colorado Homebuyers

The best time to buy a home isn't necessarily when prices or mortgage rates are at their absolute lowest.

The best time may be when you are financially ready and you find the right home at a price and payment you can afford.

Today's Colorado market may give buyers something they haven't had in a long time: negotiating power.

If you're considering buying, talk with a qualified lender about what you can comfortably afford, then work with your real estate agent to look at the entire deal—not just the price.

A good purchase isn't simply about getting the lowest possible price.

It's about getting a home you love, at a price and financing arrangement that works for your financial situation.