Entering new year, the cost of buying a home expected to rise

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COLORADO SPRINGS – Several factors will contribute to a higher cost of housing in 2022, including a booming housing market statewide and an increase in the cost of borrowing money from lenders and banks.

Colorado Springs saw another booming year in 2021, with median home values increasing 18 percent. An article by the outlet Bloomberg predicts the nation’s top housing markets, including Denver and Colorado Springs, will see prices increase another 14 percent in the months ahead.

“Homes are still moving quickly, we’re still seeing multiple offers, we’re still seeing people putting cash over the appraised value,” said Randy Bell, with START Real Estate and Colorado First Time Home Buyer.

Equity earned in 2021 in Colorado averaged $77,000 per home, according to CoreLogic. If Bloomberg’s projection of increased values hold, a $350,000 home could appreciate $49,000 in 2022.

“People saying, ‘I’m just going to wait to save money for a down payment,’ well this train has left the station,” Bell said. “You’re not going to save what you’re going to build in equity on a home.”

Home prices have increased for several years across the state. Colorado Springs broke the city’s previous record for median home price at more than $450,000 in the summer of 2021.

Bell sees that as a confluence of factors including a rising in demand and a housing market already in short supply.

“Why can’t builders catch up?” He surmises, “If builders found a piece of dirt today and they want to build on that dirt, it will take them at least two years to get through the red tape.”

Adding to the cost of homes in the new year is the Federal Reserve. The nation’s central bank expects to raise its key interest rate three times in the coming year, meaning the cost to borrow money for any loan, whether it be for a mortgage, a car, or anything else – is going up.

If interest rates jump 0.5 percent that would equal $1,149.84 per year in added interest on a mortgage for a $350,000 home.

“The good news is the Fed does not raise interest rates, usually, by half a percent. They may go by an eighth, or a quarter max, but usually an eighth. You won’t see 1.5 percent over a year, but you may see that in the next 24 to 36 months.”

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