Mortgage Rate Hikes Cool Real Estate Prices in Colorado

By Joe Taylor Jr.
Local Lender Columnist
Jul 7, 2006
Many real estate experts are forecasting a cooling of Colorado's red-hot real estate market. If you're in the market for a home in Colorado, this is a great time to start looking. Mortgage rates should stay low, while a softening market means a slowdown in home price increases.

Before you begin your search for a house in Colorado, talk to a mortgage lender about what kind of new home loan is best for you. Today's mortgage options can be confusing, and many lenders offer a number of variable-rate new home loans that seem affordable now but may stick you with skyrocketing payments just a few years down the road.

The real estate slowdown has revealed some problematic mortgage practices, especially in markets such as Colorado. One recent study showed that about a quarter of homeowners in Colorado had less than five percent equity in their houses. Holding low equity in a property, especially coupled with an adjustable rate mortgage, can make you vulnerable to economic changes.

Colorado's Slower Growth Highlights New Home Loan Strategies

With annual appreciation rates on houses in Colorado looking to slow to a more reasonable rate of 6%-8%, now is the time to approach a new home loan with caution. Lenders are continuing to offer mortgages with no money down and interest-only payments, but it may be wise to also consider 15- and 30-year fixed rate mortgages.

Interest rates remain at historic lows, with mortgage rates not expected to exceed 7% this year. Even with frequent news reports proclaiming the bursting of the real estate bubble, predictions for Colorado say the housing market will continue to appreciate at a slower, but steady rate. Financial experts recommend strongly considering the same philosophy for a new home loan - one with slow and steady payments.

Sources:
Coloradoan.com
Miami Herald

About the Author
Joe Taylor Jr. has covered business and finance news for Financial Times Television and CNBC. He coaches beginning mortgage brokers to provide better customer service and to understand creative financing opportunities.