Skyrocketing property taxes, affordable housing shortages, homes gobbled up as investment properties for Airbnb rentals — Wyomingites hoping to buy a new home in 2024 face no shortage of obstacles.
But at least one hurdle appears like it’s set to lower, with a top Federal Reserve official saying this week it appears that the war against inflation has been won. Even before that statement, many analysts have been saying that the Federal Reserve is on track to begin cutting interest rates as soon as March. That just seems to solidify the position that interest rates are headed down again.
While no one is sure how low they’ll go, anything in the 5% range is bound to dramatically change real estate markets across the state by lowering the income threshold it takes for would-be homebuyers to enter the market. But it’s not necessarily going to be a panacea for buyers in the Cowboy State.
That’s because Wyoming homebuyers are by and large looking at real estate markets that are shorter than usual, and whose prices haven’t dipped all that much during the high-interest rate period.
Sellers On The Sidelines
Part of the constrained supply is that would-be sellers who can’t trade up due to high interest rates have been sitting on the sidelines waiting for a better day.
Those sellers will likely list once interest rates are favorable again, helping a little with supply. But many areas have other factors that have been keeping their prices high and supply constrained.
Markets like Cheyenne and Jackson, for example, are seeing out-of-state demand that’s plumping prices and thinning housing stock.
In Cheyenne, Coldwell Banker Real Estate Agent Mariah Jeffrey told Cowboy State Daily she’s seeing lots of out-of-state buyers for a range of reasons, some of them political.
“I saw people from Colorado who feel it has gotten a little too liberal for their tastes and they want to come to Wyoming,” Jeffrey said. “But I also saw, probably as much or more, people wanting to come for tax reasons.”
A significant number of people are also coming to Cheyenne and other border communities because their jobs allow them to work remotely, if not every day, at least three days of the week.
“Some of them have to go back to the office,” she said. “But maybe they only have to go back two days a week now. It’s much easier for them to stomach a commute from say, Cheyenne to Fort Collins, two days a week than it would have been if they had to go five days a week.”
Nearby Laramie, meanwhile, doesn’t get much traffic from Colorado buyers, but it has many parents who are interested in buying a house for their child to live in while they attend University of Wyoming. Jeffrey said that has helped to keep market prices up and supply low in that market.
COVID Fast No More
Real estate sales associate at Our323 Kathy Scigliano has seen similar trends as Jeffrey in Cheyenne.
While in 2020 she couldn’t even show houses because offers came in so fast, the slowing of sales has been inversely proportional to interest rates rising.
“In 2020, you would get a house that would be listed that morning at 8 o’clock and it would be under contract sometimes by noon,” she said. “So, people really had to know exactly what they wanted, what their budget was, how much they could afford to like, make an offer immediately.”
But rates nearing 8% in the Cheyenne area put the kibosh on that kind of heat in the marketplace.
As much as 20% to 30% of people don’t have the buying power now for the kind of single-family home they’d want to live in.
“It’s been kicking a lot of people out,” Scigliano said. “A lot of first-time homebuyers were getting shut out because, you know, they qualified for a certain interest rate, and then rates just kept climbing.”
Interest rates are keeping houses on the market for a lot longer than sellers are used to, Lander/Riverton Real Estate Agent with RE/MAX Skye Coleman-Weisz told Cowboy State Daily.
“I’ve had people call all the time and they will say, ‘Hey, it’s been 60 days, how come my house hasn’t sold?’” he said. “Well, it’s just not like the COVID years. We’re back to more normal, you know, five to six months for your house to be on the market before it sells.”
Despite high interest rates in 2023, Coleman-Weisz feels the indicators for the real estate market in the Lander/Riverton area have remained strong.
“There’s not been a lot of foreclosures or distressed sales going on,” he said. “That means a lot of people still have equity, still have assets.”
He estimates current interest rates have wiped out around $200,000 of buying power, which the statistics he’s tracked suggest has depressed the number of sales 20% in his area.
“In COVID years, you could get a $550,000 house with an interest rate of three and a quarter,” he said.
But at present interest rates, and keeping the same monthly payment, that same homeowner would be looking at a $350,000 home.
That figure shows how interest rates are really pressing on the real estate market right now.
Don’t Expect A Buyer’s Market
Casper, like Lander, has seen a strong year in 2023, Coldwell Banker Realtor Tommy Russell told Cowboy State Daily.
“I know our market was down just a little bit in 2023, but we did move from somewhere around 80 active single-family homes in our market to around 130 toward the end of the year,” he said. “We saw an increase in listings throughout the year.”
A decrease in interest rates in 2024 is likely to only strengthen that, Russell said. But, though he’s seen more properties listed of late, he doesn’t think Casper will shift to a buyer’s market once interest rates ease.
“We still have a low inventory or inventory problem,” he said. “It would take quite a few new homes to really get our market to completely shift.”
Will Prices Ratchet Up?
Whether the pent-up demand from sidelined prospective homeowners pushes prices up depends on several factors. It’s not just how many sellers have been waiting to list their homes, it’s also how much additional demand is already in place for a given area.
In Torrington and Wheatland, for example, Jeffrey said the market has been almost “desolate” when it comes to buying and selling.
But in Cheyenne, which is short 3,000 units for the expected new jobs that are coming online according to the city’s most recent housing study, housing has been moving much more rapidly in spite of high interest rates. Out-of-the state buyers who have new jobs, and significant amounts of cash for down payments, are adding liquidity to the market.
That extra demand has kept Cheyenne prices 20% higher than Wheatland and Torrington, Jeffrey said.
That external force isn’t going to lessen with the drop in interest rates in Cheyenne, and those individuals have no homes to list to buoy supply.
And Then There’s Jackson
There are some places in Wyoming that have such attractive tourism opportunities they are money magnets. The real estate market in locations that have become attractive as playgrounds are quite different.
That’s not necessarily just Jackson, Live Water Properties Association Broker Latham Jenkins told Cowboy State Daily.
“Wyoming at large has so much to offer,” he said. “It doesn’t necessarily receive the recognition that other marquee places around the world receive, maybe due to a smaller population.”
Still, Jackson is probably at the top of the list for buyers who can afford to live wherever they want to play.
Jenkins expects once interest rates fall below 6%, activity will pick up significantly in the Jackson area.
While cash investments were able to earn a high interest rate, Jenkins saw a cooling effect on demand for Jackson properties.
“In the latter part of the year, with standard interest rates being paid on cash holdings in the markets — in other words, like your money market fund was paying 5, 6%,” Latham said. “People didn’t want to use their cash.”
People still wanted the properties, but, with their cash tied up in lucrative money markets and inhospitable financing conditions, that meant waiting for a better day for some.
Despite that cooling effect, there was no dip in prices like people were expecting, Jackson Real Estate Agent Devon Viehman pointed out. Viehman is with The Viehman Group, which tracks sales in Jackson and issues regular, comprehensive reports on the real estate market there.
“We stayed steady for the year,” she said. “My crystal ball is that all these buyers who have been kind of on the fence about what’s going on with the economy, what’s going on with interest rates — especially it’s interesting because it’s an election year which always makes people more hesitant to do things — but by summer, if people want to be here, they’re going to make a choice to be here this summer.”
Viehman expects that will evaporate any lingering buying power sellers had gained thanks to higher interest rates.
“Right now, they have kind of a unique opportunity, because there’s not a lot of competition going on,” she said. “If you put in an offer, you might have more negotiating power right now.”
Renée Jean can be reached at Renee@CowboyStateDaily.com.