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2018 Northern Colorado Real Estate Forecast

2018 Northern Colorado Real Estate Forecast

The 2018 real estate market forecast is much the same as in recent years.  That is, Colorado still has a growing economy, there continues to be a large amount of people moving to the Front Range, home values are still increasing and overall things are looking good for the long term.  The main difference is that while these positive factors are consistent, they will improve at an increasingly slower pace.

The real estate market in 2017 had continued growth as predicted (see 2017 Northern Colorado Real Estate Forecast).  For Northern Colorado, the median home price rose 10.8%, year over year as of November 2017, according to data from IRES MLS®.  Looking ahead to 2018 will read much the same way as it has in the last couple of years.  That is, since 2015, while property values are increasing, they are doing so at a steadily slower rate.  For 2018 it is predicted that home values will appreciate at a rate of 3%-5% for the greater Denver area, according to the 2018 Colorado Business Economic Outlook.  Research compiled in this report, put out annually by the Leeds School of Business at University of Colorado in Boulder, shows that there are many contributing factors to our current real estate market.  Below are a few of the highlights from their research.

Colorado’s Economy: 

Colorado is one of the top 10 producing states in the country.  Our state ranked 3rd in Gross Domestic Product (GDP) for 2017, up from 4th place in 2016.  As of September 2017, Colorado’s labor force increased 3.7%, year over year.  This is the fastest labor force increase in the country.  It is projected that job growth will continue at a slower rate in 2018 with a total of 47,100 new jobs vs. 56,300 jobs created in 2017.  Most of the job growth for 2018 is expected to be in Education and Health Services; Professional and Business Services; and Trade, Transportation and Utilities.  However, growth is expected in all sectors.

Additionally, Colorado’s unemployment rate is at 2.5%, the second lowest rate nationally.  This is a great improvement since 2010 when the unemployment rate was 8.7%.  This speaks to a strong and growing economy.

Colorado’s Population Growth:

Colorado continues to have a significant amount of people moving to the area.  The most recent data in 2016 shows a net migration (in-migration minus out-migration) of 60,000, ranking Colorado with the sixth highest rate in the country.  It is projected that the net migration for 2018 will be roughly the same.  When paired with natural increase (births minus deaths), there is projected to be an additional 30,000 added to the population for a total of roughly 90,000 new Coloradans.  The rate is slowing from the nearly 100,000 increase in population in 2015, yet Colorado is still growing at a rapid pace compared to the rest of the nation as a whole, nearly double.

How does the growing economy and population impact the real estate market?  It makes Colorado a more desirable place to live versus other areas of the country.  The influx of people that need a place to live has created a significant lack of housing inventory.  The high demand for housing has caused the skyrocketing property values we have seen in recent years.  On one hand this is good in that it creates significant equity for homeowners.  The flipside of this is that many people, especially those with low wage occupations, find it difficult to afford a home, especially one that is close to their place of work.

The solution?  More new construction.  The good news is that builders have been creating new neighborhoods at a pace not seen since 2006, just prior to the housing crisis.  The not so good news is that most residential new construction along the front range is priced too high for low wage earners.  Hopefully, builders will consider this in future development.

What to watch for this year:

  1. Amazon. Will Amazon set up their 2nd headquarters in the Denver area?  Colorado is still in the top ten states for consideration.  The amount of jobs this could bring as well as high wage earners would have an impact on the local economy, especially the housing market.
  2. New Construction. Will new construction continue to close the gap on our low inventory problem?  This will help to balance our market and further slow property value appreciation.  Further, builders are struggling with a labor shortage.  This will need to be resolved to help developments move forward smoothly.
  3. Affordable Housing. Many people cannot afford a home above $300,000.  Unfortunately, most new construction is geared toward higher income buyers.  Residential resale properties in this price range often have multiple buyers, many with cash, that makes it difficult for buyers with limited cash reserves to compete.  The solution will come as the market balances due to greater inventory and months supply (around 6 months is ideal).  Further, if builders target lower income buyers this will help many get into a home.
  4. New Tax Laws. With new tax laws that benefit corporations, will we see increases in hiring and wages for local employees?  Will we see more startup companies that will provide good wage-earning jobs?  Paired with tax cuts for the middle class, these changes could prove favorable for many who want to buy a home.
  5. Mortgage Rates. Rates have been hovering around 4% this year overall.  If it stays at this level the impact to purchasing power for homeowners is minimal.  However, if rates increase significantly it will have a negative impact on what borrowers can afford in a home at all levels.

 

References:

2018 Annual Colorado Business Economic Outlook.  Leeds School of Business, University of Colorado Boulder.

2017 Colorado Real Estate Forecast.  Sean Gilliam, Realtor®

New Construction: The Solution to Low Inventory.  Sean Gilliam, Realtor®

IRES MLS® Information and Real Estate Services LLC


About the author: Sean Gilliam is a Realtor® with RE/MAX Alliance in Northern Colorado and is a Certified New Home Specialist™.  Sean can be reached at seangilliam@remax.net or by phone at 970-313-6706.  For additional articles see Sean’s blog or to search for properties see his web page.

Interested in buying a home or selling your current home?  I am committed to your success.  Give me a call at 970-313-6706 to get started.

 

 

 

 

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New Construction: The Solution to Low Inventory

New Construction photoNew Construction: The Solution to Low Inventory

A major problem plaguing the real estate industry is low inventory.  According to the Colorado Association of Realtors® we had 27.6% less homes on the market in February 2016 than we did in February 2015.   While this is great for those wanting to sell their existing home, it puts a lot of buyers in a difficult situation.  This is because there are less homes to choose from and an increasing number of buyers to compete with.  It is an all too familiar experience that home buyers will see homes go under contract in a short span of time, sometimes hours after being listed.  In addition, with the market being saturated with buyers, there will likely be multiple offer scenarios, often above list price.  This is frustrating to buyers that don’t have the additional funds to put into an offer.  In Northern Colorado, most areas are looking at less than two month’s inventory as we go into the Spring.  This means that if no new listings come on the market, the existing homes for sale would be bought up in less than 2 months.   Ideally we would like to see a more balanced market, closer to 6 months of inventory.  This would help to serve the influx of people moving to Colorado, projected to be 90,000 for 2016.

However, with a significant amount of people moving to Colorado and a small number of people leaving, the low inventory is only likely going to continue.  Further, home buyers are competing with investors that are trying to find fix and flips or buy and hold investments.   So what will bring relief to this problem?  New construction.  As the real estate market in Northern Colorado has improved, builders are returning to the area as it is once again profitable for them.  This is of great benefit to home buyers that are struggling with the multiple offer scenarios or that simply want a new home.

So what are some of the benefits of new construction?

Fixed Price:  You won’t have multiple offer scenarios where your offer may get outbid.  While there is competition, the price will always be the same for you and the next home buyer in line.  You can shop around with different builders and see which one is best for you and which one will give you the most for your money.  There will be some sense of urgency in that lots may be bought up before you make a decision but you’ll never be outbid.

Choices:  You’ll get a choice of available lots and the available models.  Some HOA’s do have restrictions as to which model will go in a particular lot.  This is to increase the heterogeneity of the street view so you don’t have the same model consistently down on the same block. In some cases, if you want a lot with a view or that backs up to a green way or open space, you may have to pay a premium fee but it may be worth it in the long run, depending on your budget.

More choices: You get to choose paint colors, counter tops, flooring and other finishes (unless it is a spec inventory home where they make those choices and build the home then you pick the one you like).  You can also choose whether you want a fireplace as well as air conditioning (these are not typically standard options).  With existing homes, you like it or you don’t.  Yes, you can always make improvements over time but with new construction you can get it done for you all at once.

New homes are more efficient:  New homes are built to modern codes that require more energy efficient products.  Most new homes come with a high efficiency furnace and are built with materials that are more efficient and durable.  This will save you money on your monthly utility bills.

Warranties:  A newly built home typically comes with a one-year warranty (sometimes longer) for materials and workmanship.  Additionally, there is a longer term warranty (typically 10-years) on major structural defects.

You can see how new construction can be a more attractive option than existing homes due to choices you have and the avoidance of heavy competition and being outbid.  Further, it’s a brand new house that comes with warranties.

 

2016 Northern Colorado Real Estate Market Forecast

 

About the author: Sean Gilliam is a Realtor® in Northern Colorado and is a Certified New Home Specialist™.  Sean can be reached at seangilliam@remax.net or by phone at 970-313-6706.  For additional articles see Sean’s blog or to search for properties see his web page.

Interested in buying a home or selling your current home?  I am committed to serving you in attaining your goals.

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Firestone Market Update

The winter months typically see a slowdown in real estate activity.  Firestone is no exception.  There has been decreasing activity in the months of November and December overall.   November saw 14 new listings while  December only saw 9.  Of the available listings November saw 23 go under contract while December only saw 9 go under contract.  Of those that sold, the median sale price was 98.5% of the list price.  This is in contrast to the summer months of 2015 when homes in Firestone were selling at 100% or more of the list price.

In a more positive direction, December saw a few more closed sales (23) than November (19).  There was a decline in the median days on market (DOM) from November to December, each month reporting  73 and 64 respectively.

The Oak Meadows Subdivision saw three new listings in November with no new listings in December.  In November, two of the available listings went under contract while only 1 went under contract in December.  The MLS shows that 3 homes sold in the last 2 months in the neighborhood.  Of those, 2 of the 3 sold at list price or higher.  There was an increase in DOM from November to December,  from 49 to 73 respectively.  These numbers are skewed by new construction and a couple of resales that haven’t sold.

Considering this data, though it is the doldrums of winter, the market in Firestone is fairly healthy.  In the coming months it is expected that activity will increase and that property values will continue to rise, though at more moderate levels than last year.  With the ongoing influx of people to the area and business and jobs development, the market in Colorado will continue to grow.  See my blog post on the 2016 market forecast for more details.

 

Contact me if you have any questions about these statistics or the real estate market in general.

 

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