High Average

If you watch the weekly statistics that we produce and post on social media, a number that might be jumping off the screen at you is the average price.

Specifically, it is the percentage increase in average price versus last year that is striking.

We are commonly asked ‘how could average prices increase 20% to 30% in one year?’

It is important to note prices haven’t appreciated up to 30%, it’s only the average price that has increased by that amount.

A key reason why average prices have increased by such a significant amount is that there are many more luxury properties selling this year versus last year.

Sales of properties priced over $1,000,000 have seen a substantial increase compared to 2020.

Look at these numbers which show the year over year increase in closed transactions for real estate priced over $1 million:

  • Larimer County = 159%
  • Weld County = 247%
  • Metro Denver = 137%

So, transactions of luxury properties have much more than doubled compared to 2020 which is pulling up the average sales price in a significant way.

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Colorado Ranking

Here’s the latest from one of our favorite data sources – the Federal Housing Finance Authority (FHFA).

They track home prices across the Country and produce a quarterly Home Price Index report.

It is not uncommon to find Colorado near the top of the list for year over year price growth.

The latest report has us ranked 13th with only a 13% year over year increase (said with sarcasm).

Idaho is first with a whopping 24% increase. Utah is second at 19%.

Here is our interpretation of these numbers…

Colorado has a history of strong, steady price growth instead of booms and busts.

Our market does not take the big, wild swings in prices that other markets sometimes do.

The fact that Colorado is not at the very top of the list right now is actually good news to us.

We know that our clients appreciate a market that is more steady instead of one that can feel like a rollercoaster.

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Words Matter

A common phrase that is being used right now to describe the market is ‘no inventory.’

‘There’s no inventory’ is said frequently among those inside and outside of the real estate industry.

The problem with this phrase is that it is untrue.

There is inventory.  Meaning, there are a significant number of new listings hitting the market.

However, there is low standing inventory.  Meaning, the listings that do hit the market don’t stick around for very long before they are purchased.

Standing inventory, which is the number of active properties on the market, is down roughly 70% along the Front Range.

However, the number of new listings coming on the market is essentially:

  • Double compared to December 2020
  • Only 20% to 25% less than this time of year in 2017, 2018, and 2019

So, there is inventory available, it just sells quickly because demand is historically high right now.

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Calculated Risk

The economic research blog called “Calculated Risk” just completed a fascinating study on home prices.

Specifically, they looked at the correlation between home price growth and inventory.

They used price data from the Case-Shiller Home Price Index and inventory data from the National Association of Realtors.

No surprise, they found that the lower the inventory the higher the home price growth.  Also no surprise, as inventory goes up, price growth slows down.

This all correlates with simple economic rules of supply and demand.

The interesting part of their research is this:  at a certain level of inventory, prices have the potential to go down.

That level, according to their research, is six months of inventory.

That means, prices don’t have a chance of decreasing in a market until there is at least 6 months of inventory available for sale.

To put that in perspective, today there is two weeks of inventory on the market along the Front Range.

So, there would need to be 12 times the amount of homes for sale on the market for prices to even have a chance to go down.

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Tax Confusion

Did you know the value of your property according to the County Assessor is not the value of your property today?

Property owners up and down the Front Range recently received a postcard from their local County Assessor’s office with their new valuation.

Colorado properties are reappraised every two years on odd years.  The updated valuations determine how much property tax is paid.

Each County has their own unique processes and models for valuation, however…

All Counties must only consider comparable properties that sold between July 1, 2018 and June 30, 2020.

The value on your postcard is what your County thinks your property was worth almost a year ago.

As you are likely aware, the market today is significantly different than it was 11 months ago.  It’s actually quite different than it was 11 weeks ago!

The postcards with the new valuations tend to prompt very reasonable questions like:

  • What do I do if I don’t agree with the Assessor?
  • What is my property really worth?

We are happy to help you with either of these questions.

Our team is well-versed in the tax protest process, can help you research comparable properties and can also show you what your home is worth today. Just reach out to us if we can help you. The deadline to protest your value is June 1st.

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5.5 Million Short

New home construction is behind by 5.5 million homes over the last 14 years.

Since 2007, new home starts have lagged significantly behind the long-term average.

The Census Bureau started tracking National new home starts in 1958.

Between 1958 and 2007, an average of 1,102,938 new homes were started each year.

Between 2007 and 2020 the average fell to 708,186 which represents a shortfall of 394,752 per year.

That adds up to a total shortfall of 5,526,525.

The under-supply of new homes is of course a significant reason why the market is under-supplied overall.

credit Inman News as the source of this story

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Drastically Different

Recently it seems there are many attempted comparisons being made between today’s real estate market and the 2006-2007 market.

It seems that people fear a repeat of what happened to the market in 2008 and 2009.

Buyers, understandably, want to make smart decisions and don’t want to buy in advance of any downturn.

The reality is this.  There are some similarities between now and the pre-bubble market of 15 years ago.  Namely, prices are appreciating quickly.

However, there is one massive difference.

The inventory of homes for sale right now is drastically different than 15 years ago.

The rules of economics tell us that, in order for prices to crash, demand needs to diminish, supply needs to swell, or some combination of the two.

Here’s the deal.  Supply today is a fraction of what is was 15 years ago.

Homes for sale today:

  • Larimer County = 238
  • Weld County = 226
  • Metro Denver = 2,594

Homes for sale 15 years ago:

  • Larimer County = 2,998
  • Weld County = 1,113
  • Metro Denver = 29,045

The reason why prices flattened and decreased slightly along the Front Range in 2009 is because the National economy had a meltdown and there was a glut of supply.

We do not have anything similar to those same dynamics today.

We are watching the market closely every single day.  While we don’t expect the current pace of appreciation to keep up, we believe inventory levels keep us insulated from any kind of crash.

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Colorado Bound

The 2020 Census confirms what we already know – Colorado is popular!

It turns out that many people have been Colorado-bound over the last 10 years.

Our state has grown by the equivalent of one Mile High Stadium’s-worth of people each year over the last 10 years.

Here are the numbers:

  • 2020 population is 5.77 million
  • 10-year population increase is 744,000
  • 10-year percentage increase is 14.8%
  • Colorado ranks 21st among all states for population
  • Only 5 states had a larger percentage increase over the last 10 years (Idaho, North Dakota, Nevada, Texas & Utah)

Only 8 states had a larger increase in population over the last 10 years (Arizona, California, Florida, Georgia, New York, North Carolina, Texas & Washington

The post Colorado Bound appeared first on Fort Collins Real Estate | Fort Collins Homes for Sale & Property Search.

Colorado Bound

The 2020 Census confirms what we already know – Colorado is popular!

It turns out that many people have been Colorado-bound over the last 10 years.

Our state has grown by the equivalent of one Mile High Stadium’s-worth of people each year over the last 10 years.

Here are the numbers:

  • 2020 population is 5.77 million
  • 10-year population increase is 744,000
  • 10-year percentage increase is 14.8%
  • Colorado ranks 21st among all states for population
  • Only 5 states had a larger percentage increase over the last 10 years (Idaho, North Dakota, Nevada, Texas & Utah)

Only 8 states had a larger increase in population over the last 10 years (Arizona, California, Florida, Georgia, New York, North Carolina, Texas & Washington

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Future of Work

This week we had the opportunity to hear a presentation by Ed McMahon who is the Senior Fellow for Sustainable Development at the Urban Land Institute.

 

He is a leading expert on the future of housing and development in the United States.

 

He sees that Colorado is positioned to massively benefit from the work from home shift taking place across the Country.

 

Ed cited that only 1 in 10 companies expect employees to come back to the office to work full time.  The believes the future of work is a hybrid model where most employees are mixing their work hours between the company office and their home office.

 

What does this mean for housing demand?

 

Smaller cities (like Denver), suburbs and high-amenity small towns will benefit.

 

He sees that those places with a high quality of life will benefit the most.

 

Bottom line, if people are untethered from their corporate office and can live anywhere, they will choose to live in places that are nice to live.

 

Colorado is certainly high on the list of high-amenity and high-quality places.

 

So, the new work from home dynamic is another reason to be bullish on the future of Colorado real estate.

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