2018 NORTHERN COLORADO Real Estate Market Update
Q2
Price range determines if you’re in a buyer’s or seller’s market Conventional wisdom tells us Northern Colorado is in a seller’s market. After all, the region’s supply of homes for sale has remained tight for several years running, demand maintains a steady simmer, and average prices keep climbing. Identifying a seller’s market or buyer’s market requires a closer look – maybe even as close as a neighborhood, a city block, or a specific property. Through that lens, you’ll see that Northern Colorado is a patchwork of seller’s and buyer’s markets. Traditionally, a balanced market is defined as six months of supply – meaning it would take six months to sell all available homes at the current pace of sales. Less than six months gives the advantage to the sellers, resulting in more competition for less supply, and upward pressure on prices. When the supply dwindles down toward one month, you often see multiple offers from buyers. A buyer’s market occurs when supply is greater than six months. That’s when buyers enjoy more houses to choose from, and consequently more leverage on price. The spread between the original
list price and the eventual sales price gets larger, as sellers are forced to adjust their pricing strategies to make their properties more competitive. As the second quarter progressed, we saw different locations and price points experiencing varying levels of demand. Using price ranges as a guide, let’s examine where the seller’s markets were the strongest and where some buyer’s markets exist across Northern Colorado: $300,000-$500,000. Understandably the most popular price point for buyers, and definitely a seller’s market wherever you go. In Fort Collins, Greeley and Loveland, the supply of homes in this range was at one month or less as of June, and sellers were getting about 101 percent of the original list price. In Berthoud, there was a three-month supply of homes in this range, and the average sale fetched 100.3 percent of the original price.
THIS CHART COMPARES STATISTICS FOR REAL ESTATE SALES IN NORTHERN COLORADO FROM JUNE 2016, JUNE 2017 AND JUNE 2018 SUB-MARKET Fort Collins
TOTAL TOTAL TOTAL AVG AVG SALES SALES SALES 1-YEAR% PRICE PRICE JUNE JUNE JUNE CHANGE JUNE JUNE (‘17-’18) 2016 2017 2018 2016 2017 347
374
342 -8.56%
$385,831
$403,626
$610,135 $623,024
AVG PRICE 1-YEAR% CHANGE JUNE (‘17-’18) 2018 $429,593 $679,129
6.43%
Timnath
16
18
37 105.56%
9.01%
Wellington
43
38
34 -10.5% $321,366 $320,509 $331,889 3.55%
Greeley/Evans
228
22
217 -3.98% $252,442 $290,164
Loveland/Berthoud
222 237 247 4.22% $350,714 $388,421 $394,275 1.51%
$301,241 3.82%
Windsor/Severance
117
115
Estes Park
37
30
Ault/Eaton/Kersey/Milliken/ Johnstown/LaSalle/Mead
90
122 129 5.74% $322,604 $368,683 $380,428 3.19%
TOTALS
THE GROUP, INC. REAL ESTATE | Q2 2018
142 23.48% $364,973 $448,783 $424,258 -5.46% 31
3.33%
$377,789
$499,587
$518,863
3.86%
1,100 1,160 1,179 1.63% $344,176 $382,379 $399,909 4.58%
$500,000-$700,000. Supplies in this segment ranged from 1.6 months (Fort Collins and Greeley) to four months (Loveland and Berthoud). But the seller’s percentage of list price was less predictable – as high as 101.3 percent in Loveland and as low as 97.6 percent in Greeley. $700,001-$1 million. Signs of a buyer’s market for those shopping in this price range. Only in Fort Collins was supply at less than six months (4.4 months). Greeley, Loveland and Windsor all reported at least seven months of supply. But Greeley sellers got 100.6 percent of their asking price, while the Fort Collins sellers only brought in 96.2 percent. A number of variables, including location, price, and the condition of the home, will help or harm any property from bucking the statistical trend. A house in this region located in a highly desirable location and in superior condition will always stand out to would-be buyers. The ongoing challenge is that everyone holds their home in the highest regard and typically has a hard time looking objectively at its location, price, and condition. Knowing your local market supply is critical as you get ready to sell or buy. Reading headlines can be deceptive and lacks the hyperlocal focus necessary to establish realistic expectations. The buyers’- sellers’ patchwork is not the only trait of the local housing market that has defied conventional wisdom so far in 2018. Another characteristic is – despite a continued run of home price appreciation – that prices across Northern Colorado stack up very favorably to values in the Denver metro area. A snapshot during the second quarter found that average sale prices in the Denver suburbs routinely surpassed $530,000, easily 15-20 percent more than places such as Fort Collins, Greeley, Longmont, and Loveland.
RESIDENTIAL INVENTORY ATTACHED AND SINGLE-FAMILY JANUARY 1-JUNE 30 (5-YEAR HISTORY) FORT COLLINS / WELLINGTON / TIMNATH 2636
2501
2404
1904
1891
1815
2623
2584
1912
1892
BUILDING PERMITS APRIL1-JUNE 30 FORT COLLINS
127
116
WELLINGTON
14
21 TIMNATH
’14
’15
’16
Homes Listed
’17
’18
Homes Sold
59
3
Single-Family
LOVELAND / BERTHOUD
LOVELAND
76 1337
1398
1413
955
1035
1070
’14
’15
’16
Homes Listed
1657
Multi-Family
243
1526
1194
1097
’17
’18
BERTHOUD
113
0
Homes Sold Single-Family
GREELEY AREA 2179
2188
2176
1562
1692
1659
’14
’15
’16
Homes Listed
1667
1618
’17
Multi-Family
GREELEY 2145
136
123
1636
’18
EVANS
20
3
Homes Sold Single-Family
WINDSOR
WINDSOR / SEVERANCE
144
546 387
628 429
689 449
770 470
’14
’15
’16
’17
Homes Listed
1035 743 ’18
Multi-Family
13
SEVERANCE
136
0
Homes Sold Single-Family
Multi-Family
THE GROUP, INC. REAL ESTATE | Q2 2018
In Colorado, taxes are just a slim slice in the cost of housing If the primary rule for purchasing a home is “location, location, location,” then price must be a close second, right? Not so simple. Homebuyers need to think more in terms of the cost of home ownership, which–in addition to the sale price– accounts for the going mortgage rate and a factor that’s often overlooked: property taxes. If you gulped when you wrote the check for your latest tax bill in April, you might take comfort in knowing that Colorado’s average effective property tax rate (0.51%) is roughly half the national average (1.17%), and just a quarter of what homeowners are asked to pay in states such as Illinois, New Jersey and Texas. Our low property taxes are rooted in long-standing state laws (see Gallagher and TABOR article).
Consider the case of Windsor homeowners who recently relocated from Woodstock, Illinois– about 50 miles northwest of Chicago–where their tax bill on a $310,000 house was $8,340 in 2015. Taxes on their Northern Colorado home, valued, at $510,000, were about $4,000 last year, less than half of what they paid in Illinois and on a significantly more expensive home. True, tax rates can vary in a matter of few miles (the average effective rate in Weld County is 0.45 percent and the average rate in Larimer County 0.49 percent). Differences can be due to whether you are paying for services such as water or pest control, or live in a metro district that’s also billing you for a pool, parks, or street improvements.
For a closer look at what we mean, here’s a sample property tax breakdown of a recently purchased home in Fort Collins that’s valued by the Larimer County Assessor at $525,400.
Lows States with lowest average effective property tax rates.
0.34%
0.49%
0.51%
0.56%
0.57%
50. HAWAII
49. ALABAMA
48. COLORADO
47. TENNESSEE
46. WEST VIRGINIA
2.28%
2.22%
2.19%
2.15%
2.06%
1. NEW JERSEY
2. ILLINOIS
3. VERMONT
4. TEXAS
5. NEW HAMPSHIRE
Highs States with highest average effective property tax rates.
THE GROUP, INC. REAL ESTATE | Q2 2018
Q2
Gallagher and TABOR: A constitutional lid on residential property taxes How do Colorado homeowners find themselves with the some of the lowest property taxes in the country? That’s largely due to a constitutional amendment approved by Colorado voters in 1982. The so-called Gallagher Amendment keeps residential property owners from paying more than 45 percent of the state’s total property tax base–making commercial property responsible for at least 55 percent. Consequently, because home values continue to increase at a faster rate than commercial values, the state must continue to adjust the residential assessment rates downward to stay at the 45 percent threshold. That doesn’t mean your property tax bill necessarily shrinks, but increases are likely minimal. While the Gallagher Amendment keeps your property tax bill small by comparison with other states, it also contributes to an ongoing budget conundrum for state and local governments. Under Gallagher, as noted, assessment rates have come down. But when commercial values surged during the state’s energy boom and outpaced residential values, authorities were not able to simply raise residential tax rates to keep the 45-55 balance. That’s because of Colorado’s Taxpayer Bill of Rights, or TABOR – a constitutional amendment which requires voter approval of any tax increase. With the two incompatible amendments in place to keep residential property taxes down, local institutions that are property-tax dependent–i.e., school districts, county governments, community colleges, and police and fire agencies–contend they have less money to meet their needs. And critics argue that recent political conflicts, notably the protests by school teachers over pay and classroom conditions, are a direct result of the two tax policies. The Property Taxes at a Glance chart compares average residential tax bills and residential property values for a range of Colorado counties, according to a study by ATTOM Data Solutions. Source: Home Builders Association of Northern Colorado
Where do your property taxes go? In Colorado, property taxes are collected locally and primarily support local use. On average, public schools command about 49 percent of your residential tax bill, followed by county government at 25 percent. The remainder of your payment is spread between services such as fire protection, library services, health care services, your city or town government, and utilities–unless those are provided by your city or town. Those who live in a designated metropolitan district are responsible for that additional assessment as well. What is a metropolitan district? Chances are if you live in a new neighborhood built outside city services, you’re in one. Metropolitan districts are created as special taxing districts, primarily for new residential developments that emerge outside municipal service boundaries. These metro districts assess a property tax on their homeowners to finance municipal-type services such as parks, trails and other recreational amenities. Unlike fees for a homeowners’ association, taxes paid into a metro district are deductible from your taxes if you itemize. There approximately 1,900 such districts across Colorado. Property Taxes at a Glance COUNTY
AVERAGE PROPERTY TAXES (2017)
AVERAGE PROPERTY VALUE (2017)
Boulder $3,506
$640,499
Douglas $3,140
$522,458
Larimer $1,968
$399,663
El Paso
$1,307
$312,178
Weld $1,520 $336,832 La Plata
$1,236
$441,908
Logan $785 $155,277 Mesa $991 $247,238 Routt $2,855
$739,478
Pitkin $11,998 $2,716,488 THE GROUP, INC. REAL ESTATE | Q2 2018
Q2
Outlook: Familiar market forces combined with some emerging factors Consistency has been a hallmark of the Northern Colorado real estate market over recent years; high demand from buyers, scant inventory and price appreciation. All were influential forces again in the second quarter and – at varying degrees – will remain factors in the third quarter.
more competitive with their pricing and work with a professional Realtor® to attract a qualified buyer. They could also take advantage of the benefits of The Group’s GUARANTEED MOVE, a program through which The Group ensures it will buy a house at an agreed-upon price if doesn’t sell before closing on a new home.
But that doesn’t mean the new quarter is necessarily the same old story. Here are a handful of trends we’ve Moving on up seen taking shape this year that will help define the OK. Maybe the message that we’re in a strong coming months for both home buyers and sellers: “move-up” market is not entirely new. But we can say that the window of opportunity isn’t going to Pricing matters Over the first two quarters, the supply-and-demand stay open forever, and the third quarter may be story was clear cut – buyers were plentiful and the ideal time to jump through – especially if you houses were not. As a result, it was common to see currently own a home valued in the $300,000buyers make offers above list price. As the third $400,000 range. Why?
quarter unfolds, we’re starting to see a shift in that Several key factors are in flux at the same time. equation. Interest rates are gradually moving up, price growth Overall, supply is still catching up. But in certain at the higher end of the market is slowing, and price points, the pendulum is swinging back to availability for homes above $500,000 is ample. That more stable market conditions. As evidence, we can all adds up to moving up. point to the fact that average June sales prices across the Northern Colorado region were up 4.6 percent, followed by 3.9 percent for July. A year ago? June prices soared 11.1 percent and July jumped by 8.9 percent.
First of all, if you’ve owned that house for even as little as two years, then you’re likely sitting on a bundle of equity – made possible by the rising prices we mentioned earlier. Second, demand is strongest for homes priced under $400,000. Consequently, Sellers are less likely to see multiple offers on their the odds of earning a healthy profit are in your homes, and houses are going to spend more time favor. And third, more availability above $500,000 on the market. That means sellers will need to be means the opportunity to snag a deal – before those interest rates go up any more.
The Group Inc’s Affiliated Businesses The Group Inc’s affiliated businesses assist Group customers and anyone who can benefit from our services. Guaranteed Title had a strong second quarter, with a 5% increase in number of closings. June featured the second-largest number of closings since 2007.
THE GROUP, INC. REAL ESTATE | Q2 2018
The volume of loans funded by the Group Mortgage increased between Q2 2017 and Q2 2018. It ranks among top 5 residential loan providers in Northern Colorado.
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
3.3% 2.0% 2.7%
INDUSTRIAL RETAIL OFFICE
2.7% 5.4% 3.6%
3.6% 4.2% 4.8%
GREELEY/WELD AREA
GREELEY
1.3% 1.2% 3.5%
LOVELAND AREA 3.4% 4.1% 3.4%
*Q1 2018
Q2 2017
3.6% 4.2% 4.8%
INDUSTRIAL RETAIL OFFICE
2.2% 4.7% 3.8%
3.1% 4.6% 3.5%
3.1% 4.6% 3.5%
LOVELAND AREA
INDUSTRIAL RETAIL OFFICE
6.2% 3.4% 9.2%
6.9% 3.4% 8.2%
7.0% 3.4% 8.2%
LONGMONT AREA
Q2 2016 INDUSTRIAL RETAIL OFFICE
*Q2 Information not available at time of printing
7.2% 3.7% 8.9%
3.7% 6.3% 7.6%
Q2 2018
Q2 2017
11.0% 10.0% 9.0%
Q2 2016
MORTGAGE RATES
The Source Property Management opened last fall, and now manages 220 units. It serves both renters and landlords.
4.6%
3.9%
3.75%
JUNE 2018
JUNE 2017
JUNE 2016
Source: freddiemac.com
THE GROUP, INC. REAL ESTATE | Q2 2018
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