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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Copyright © May 7, 2018 The Group, Inc. Real Estate