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2018 NORTHERN COLORADO Real Estate Market Update


Inventory to meet the needs of homebuyers As 2018 began to unfold, we felt the familiar influence of a lack of housing supply – not just in Northern Colorado, but nationwide. In fact, the National Association of Realtors reports that nationwide inventory in January was down 9.5 percent from the same time last year, leaving only 3.4 months of supply – the lowest since 1999. Locally, we began the year with inventory that was flat – down from 1,246 to 1,244. And as we’ve learned so well along the Front Range, such limited availability coupled with high demand keeps putting upward pressure on prices. Northern Colorado’s average sale price was up 9.9 percent over the first quarter of 2017 One possible source of inventory to meet the needs of area homebuyers is new construction in smaller communities. After the pace of new home construction faltered in the wake of the Great Recession, we’re seeing a resurgence in towns such as Berthoud, Timnath, Windsor and Severance Sales in the Windsor-Severance sub-market surged during the first quarter by almost 51 percent over the first quarter of 2017. At the same, average sales prices for the quarter slipped by just under 1 percent (0.74), from $406,640 to $403,605.

THIS CHART COMPARES AVERAGE FIRST-QUARTER SALES PRICES FOR EACH LOCAL SUB-MARKET FROM 2016 TO 2018:

To a degree, the moderation in prices for Windsor-Severance can be explained by an increased availability of homes under $400,000 which can keep a check on the average overall price. Windsor-Severance was the only submarket where the supply of attached homes, such as townhomes and duplexes, increased over last year’s first quarter. Specifically, the inventory of attached homes increased from 16 in the first quarter of 2017 to 28 this year—up 75 percent. Overall inventory for Windsor-Severance was flat—238 compared to 236 at the same time last year. But once again, that’s an advantage over the rest of the region, where total inventory was down 14.7 percent at the close of the first quarter. The takeaway from this data: Builders are bringing a much needed supply of inventory of new homes to the market in the WindsorSeverance area to address demand. If that continues to be the case, buyers looking for opportunity will find it here.

SUB-MARKET

Q1 2016

Q1 2017

% CHANGE

Q1 2018

% CHANGE

Fort Collins

$361,582

$382,354

+5.7%

$416.267

+8.9%

Greeley/Evans

$236,949 $259,994 +9.7% $300,484 +15.6%

Longmont

$376,293 $413,347 +9.8% $443,216 +7.2%

Loveland/Berthoud

$344,583 $368,429 +6.9% $397,340 +7.8%

Timnath

$544,622 $537,397 +1.3% $538,358 +0.2%

Wellington

$306,117 $308,454 +0.7% $342,743 +11.1%

Windsor/Severance

$398,735 $406,640 +2.0% $403,605 -0.8%

Ault/Eaton/Kersey/Milliken/ Johnstown/LaSalle/Mead

$305,280 $321,869 +5.4% $360,459 +12.0%

THE GROUP, INC. REAL ESTATE | Q1 2018


RESIDENTIAL INVENTORY ATTACHED AND SINGLE-FAMILY JANUARY 1-MARCH 31 (5-YEAR HISTORY)

While Windsor/Severance may be the most intriguing sub-market in Northern Colorado, there are plenty of additional story lines that warrant attention: • More than any other community, Greeley/Evans has felt the pinch of tight inventory over the past two years. After an 18 percent decline in first-quarter supply from 2016 to 2017, supply was down another 12 percent this year. Consequently, average prices have increased $63,535 per home over the two-year period, increased 15.7 percent over the first quarter of 2017, and even eclipsed the $300,000 threshold for the latest quarter. Yes, Greeley remains an affordable option for a region where overall average prices are pushing $400,000, but that price gap is starting to close as availability dwindles. • Berthoud was the big story over the last two years due to a burst of new construction. But as builders are wrapping up their current phase of construction, both inventory and sales have slowed in the Loveland/ Berthoud market. First quarter sales declined 10.3 percent for the quarter while supply declined 24.6 percent. • Prices in the Fort Collins/Timnath/ Wellington area increased 8.8 percent over the first quarter of 2017. While that’s in step with the region as a whole (9.9 percent), it’s worth noting that last year’s first quarter prices increased by just 5.7 percent. Once again, we see the influence of continuing demand—sales up 3 percent—with less inventory to choose from—down 12.5 percent.

FORT COLLINS WELLINGTON / TIMNATH

1066

689

’14

1000 760

934 708

1080

1036

724

725

*

BUILDING PERMITS JANUARY 1-MARCH 31

( Numbers Through End of February)

FORT COLLINS

37* ’15

’16

Homes Listed

’17

25*

’18

Homes Sold

LOVELAND / BERTHOUD

Single-Family

Multi-Family

LOVELAND

762 605

586

591

346

409

418

433

400

’14

’15

’16

’17

’18

515

Homes Listed

Homes Sold

73

Single-Family

GREELEY AREA 890

996

941

887

617

663

683

703

’14

’15

’16

’17

Homes Listed

40

GREELEY 950 666

74

517 256 150

’14

’15

301

319

165

187

281

’16

’17

’18

Homes Listed

3

’18

Homes Sold

Single-Family

Homes Sold

Multi-Family

WINDSOR

WINDSOR / SEVERANCE

220 153

Multi-Family

67*

Single-Family

4*

Multi-Family

THE GROUP, INC. REAL ESTATE | Q1 2018


Move up market and investors Other sources of homes to meet the demand could be the move up market and investors. As home values have climbed in recent years, many existing homeowners in Northern Colorado find themselves sitting on substantial amounts of equity. With that newfound wealth, the opportunity to sell and move up to a dream home has rarely been better. And as more people seize that opportunity, it will provide inventory for others looking for entry-level or mid-range options. But a note of caution – with mortgage rates beginning to inch up, and the consequential impact on buying power that would follow – that window of opportunity for move-up buyers may well be starting to close. Investors who own houses as income properties have long been a force in the local market. But the time may be right for many of them to take advantage of the demand and strong prices to sell off portions of their holdings. Motives can include the desire to simplify their portfolios, use profits to invest in business opportunities, or to put their kids through college.

In the face of concerns that rising mortgage rates might dampen demand around the country, we’re unlikely to feel much impact in Northern Colorado. Why? First of all, even with the recent bump, rates remain historically low. Next, people continue to want to move here for lifestyle reasons. And most importantly, continuing job growth along the Front Range keeps providing people with the wherewithal to buy a home. On balance, the first quarter results reinforce what we suspected at the start of the year. The local housing market remains hot and shows no signs of cooling off. As we enter the height of the selling season, keep a close eye on supply. That’s the determining factor for how we will be assessing the second quarter.

LESS IS MORE How can reducing your real estate portfolio increase your cash flow? Here’s how: •

You own 10 houses worth $350,000 each.

You owe $150,000 on each, leaving $2 million in equity.

Your current monthly cash flow is $600 on each, or $6,000 total per month

If you sell 5 houses, you can pay off the other 5.

Now you own 5 houses free and clear, worth $1.75 million.

Without mortgage payments, your new monthly cashflow is $1,450 each, or $7,250 per month. SOURCE: WAKE-UP MONEY FROM THE GROUP, INC.

THE GROUP, INC. REAL ESTATE | Q1 2018


At a glance – employment and population growth Approximately 12 to 18 months following increases in job growth, the local housing market is impacted. Northern Colorado cities have been experiencing steady employment and population growth and the Northern Colorado area is among

the top markets for home appreciation over the past year. Employment continues to be the leading indicator of rising housing demand and the latest figures hint at more to come. 5-YEAR CHANGE

NUMBER OF PEOPLE EMPLOYMENT 2013, 2017, 2018

120,000

130,000

140,000

150,000

LARIMER COUNTY WELD COUNTY

160,000

170,000

161,013

127,519

149,778

BOULDER COUNTY

180,000

190,000

186,050 193,384 +3.9% +30.1%

157,196

163,449

SOURCE: COLORADO DEPARTMENT OF LABOR & EMPLOYMENT. NOTE: FIGURES ARE NOT SEASONALLY ADJUSTED.

+4.9% +23.3%

181,503 187,440

+3.3% +14.7%

1-YEAR CHANGE

Property taxes One of the factors that shapes housing affordability is property taxes – where Colorado claims one of the lowest rates in the country. As a percentage of home value, Colorado’s median property tax rate is just 0.6 percent – ranking 39th nationally. LEGEND

Lowest Tax Highest Tax 1. New Jersey 1.89% 2. New Hampshire 1.86% 3. Texas 1.81% 4. Nebraska 1.76% 5. Wisconsin 1.76% 6. Illinois 1.73% 7. Connecticut 1.63% 8. Michigan 1.62% 9. Vermont 1.59% 10. North Dakota 1.42% 11. Ohio 1.36% 12. Rhode Island 1.35% 13. Pennsylvania 1.35%

14. Iowa 1.29% 15. Kansas 1.29% 16. South Dakota 1.28% 17. New York 1.23% 18. Maine 1.09% 19. Minnesota 1.05% 20. Massachusetts 1.04% 21. Alaska 1.04% 22. Florida 0.97% 23. Washington 0.92% 24. Missouri 0.91% 25. Maryland 0.87% 26. Oregon 0.87%

27. Indiana 0.85% 28. Nevada 0.84% 29. Georgia 0.83% 30. Montana 0.83% 31. North Carolina 0.78% 32. California 0.74% 33. Oklahoma 0.74% 34. Virginia 0.74% 35. Arizona 0.72% 36. Kentucky 0.72% 37. Idaho 0.69% 38. Tennessee 0.68% 39. COLORADO 0.6%

40. Utah 0.6% 41. Wyoming 0.58% 42. New Mexico 0.55% 43. Mississippi 0.52% 44. Arkansas 0.52% 45. South Carolina 0.5% 46. West Virginia 0.49% 47. District of Columbia 0.46% 48. Delaware 0.43% 49. Alabama 0.33% 50. Hawaii 0.26% 51. Louisiana 0.18%

THE GROUP, INC. REAL ESTATE | Q1 2018


Vacancy rates The residential vacancy rates have been extremely low in our area causing escalating rents. As several new apartment projects were completed in 2017 we have seen a bump in the vacancy rates.

Vacancy rates have remained low in nearly every sector of the commercial market. The increase in demand for land and office space, coupled with the low vacancy rate for retail space point to a healthy overall market for commercial real estate.

APARTMENT VACANCY RATES

COMMERCIAL VACANCY RATES

FORT COLLINS AREA

FORT COLLINS AREA

3.0% 2.2% 1.8%

INDUSTRIAL RETAIL OFFICE

15.1% 4.2% 6.1%

GREELEY/WELD AREA

LOVELAND AREA 3.8% 6.7% 3.7%

Q1 2017

INDUSTRIAL RETAIL OFFICE

4.6% 3.4% 2.6%

INDUSTRIAL RETAIL OFFICE

3.1% 9.0%

6.4% 6.6% 5.9%

8.0% 7.0% 7.0%

LOVELAND AREA 12.8% 4.4% 8.5%

13.0% 5.0% 9.0%

LONGMONT AREA

Q1 2016 INDUSTRIAL RETAIL OFFICE

THE GROUP, INC. REAL ESTATE | Q1 2018

4.0% 6.0% 8.0%

GREELEY

2.2% 4.0% 4.0%

Q1 2018

3.7% 5.6% 6.1%

14.9% 4.0% 8.2%

10.8% 10.1% 9.3%

12.0% 9.0% 9.0%

Q1 2018

Q1 2017

Q1 2016


With mortgage rates climbing, it’s time for sellers to act If you’ve been on the fence about selling your home, the recent movement in interest rates may be the decisive factor you’re looking for. As average rates on 30-year fixed loans inch higher – 4.57 percent as of March 2, up from 4.14 percent in early January – house hunters lose purchasing power. The “1 Percent Rule” tells us that for every 1 percent increase in lending rates, a buyer loses 10 percent of their purchasing power – meaning they simply can’t qualify for the same size of loan.

The consequence? Higher rates mean a smaller pool of potential homebuyers, leading to less demand for your property, and possibly downward pressure on your asking price. The consensus among forecasters is that mortgage rates will continue their upward climb. The time to maximize your leverage as a seller is here.

MORTGAGE RATES SOURCE: FREDDIEMAC.COM

4.41%

4.20%

3.75%

MARCH 2018

MARCH 2017

MARCH 2016

Home buying power Today's low rates give buyers incredible buying power. Each 1% increase in interest rate erodes a buyer's power by 10%. EFFECT OF MONTHLY P&I PAYMENT ON A $400,000* HOME AS RATES RISE

HOME BUYING POWER OF A $1,528/MO. P&I PAYMENT AS RATES RISE

4%

5%

6%

7%

$400,000

$2,129

7%

$356,000 $319,000 $287,500

$1,919

6%

5%

4%

$1,718 $1,528

*GRAPH BASED ON A 20% DOWN CONVENTIONAL LOAN.

THE GROUP, INC. REAL ESTATE | Q1 2018


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Q1 2018 Northern Colorado Real Estate Market Update  

Q1 2018 Northern Colorado Real Estate Market Update  

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