DENVER — The Federal Reserve announced Wednesday that federal funds interest rates will go up three-quarters of a percentage point — the fourth hike in six months. However, data shows this latest hike is still lower than past historic highs.
“In 1982, the interest rates were about 18.5%,” said April Denmon, owner of Denmon Realty.
Denmon said families still bought homes in the 80s, and there’s hope for buyers today.
“So, in January of this year, we had 712 houses on the market. Today, we have about 7,400 houses on the market,” Denmon said. “Normally, homes in Colorado appreciate 5% to 6% a year. The last two years, homes appreciated 20% to 24% a year.”
This graph from the Federal Reserve charts interest rates over the past several years.
Denmon said the rising interest rates continue to provide a check on the market.
“If the interest rates wouldn't have gone up, we would still be experiencing the multiple offers, the bidding wars, no inventory,” Denmon explained. “When the rates were low, at one point I was thinking, ‘How high is a one-bedroom condo going to go up? $800,000? $900,000?' That's where we were going… interest rates are high, but they're not the highest that we've ever seen.”
But Denmon said to be fair, the cost of living was a lot different 40 years ago. According to the United States Census Bureau, in 1982, the median family income was $23,430, and the median home price was $69,300, which means homes costs three times what a family earned yearly.
Today, the median family income is $70,784, and the median home price is $403,556, which is almost six times what an average family earns.
Denmon said interest rates are another homebuying challenge, but they’re not “one size fits all," they’re personal.
“So the programs that work for clients, they're not having to pay the high seven interest rates. I just locked the interest rate last week at 5.3%,” Denmon said.
Denmon said buying a home in Colorado is hard, and homes are expensive, but home ownership is achievable.