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The Real Estate Insider Vol. 46, No. 4 | MAY 2022

NEW DIRECTION: HOUSING MARKET AT A PIVOT POINT

Chances are, you’ve been part of this conversation with a neighbor – about the house down the street that just sold for tens of thousands of dollars over the asking price, and for far more than any price that seemed plausible in your neighborhood.

It’s not a mirage. In some cases, last year’s $450,000 house is fetching $525,000, or maybe $550,000. Even $600,000.

Last year, the Northern Colorado market experienced its biggest one-year leap in home appreciation – 18 percent – in nearly 40 years (1982-’83). And with each “I-can’t-believe-it sale”, it seems that market values in many neighborhoods are being reset on a weekly basis.

For home buyers and sellers, it’s time to re-set expectations and pivot with a changing real estate landscape. Here are some tips for dealing with the steep slope of today’s home prices:

  • Understand your financial picture. Working with an astute mortgage lender will help you make sure you’re equipped to adjust to rising prices.
  • Know your ceiling. How far are you willing to go if prices shift during your search? You may need to accept that the market you want to be in may not be the market for you.
  • Be ready to react. In a low-inventory, fast-moving market, working with a real estate professional who understands the neighborhood market dynamics can prepare you for making a quick decision when a home goes up for sale
  • Sellers, price it right. Yes, the market is robust, but don’t shoot yourself in the foot. There have been cases in recent months where sellers in Northern Colorado have posted excessive prices, only to cut prices later. (On the other hand, don’t leave money on the table – a REALTOR® can help you get an accurate pulse of the pricing trends where you live).

What is a hyper-local market? Call me to understand what this means to you.

IN REAL ESTATE, LOOKING LIKE $1MM IS LOOKING MORE COMMON

A recent analysis of real estate values across the United States shows that roughly 6 million homes are worth $1MM or more.

While the report from the real estate firm Redfin is eye opening, it’s only part of the story. As the number of $1MM homes is rising, the average size of $1MM homes is getting smaller. At least here in Northern Colorado.

Looking at $1MM sales in our area over the past decade, $1MM homes declined in size from an average of 7,762 square feet in 2011 to 3,667 square feet in 2021 (53 percent smaller). Instead of five bedrooms, five bathrooms, and a four-car garage 10 years ago, the average $1MM home now comes with four bedrooms, three bathrooms and a four-car garage.

The same story applies to the $500,000 price tag. From an average size of 4,241 square feet in 2011, $500K landed 2,701 square feet in 2021 (36 percent smaller), although the typical number of bedrooms (4), bathrooms (3) and garage spaces (2) are unchanged.

Of course, there are a host of reasons for these dramatic shifts. From the cost of new construction to the high demand for homes, the market forces are remaking the price structure of the Northern Colorado market.

Call me to see what $1MM will buy in your neck of the woods.

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MARKET STILL MANAGEABLE FOR FIRST-TIME HOME BUYERS

As part of the broader conversation about the state of the American housing market, one of the popular talking points in recent months is the apparent demise of the first-time homebuyer. Popular – but not true.

In fact, while it may not be easy for first timers to land their preferred property, they remain a formidable factor in residential real estate. A recent report from the National Association of REALTORS® tells us that first-time buyers made up 34 percent of all home purchases in 2021, which is up from 31 percent in 2020.

There are reasons to believe that the upswing could continue.

  • Demographic data indicates that millennials – the generation of 62 million Americans born between 1981 and 1996 – are entering the housing market in large numbers. The average age for first-time buyers last year was 33, and 37 percent of all buyers last year were millennials.
  • Even as interest rates have increased in recent months, they are still low by historical standards; that factor helps to make owning more affordable than renting for most Americans.
  • Financing restrictions have eased since the end of the Great Recession, and lenders are a bit less strict on income standards.
  • Contrary to conventional wisdom, you don’t always need to save for a 20 percent down payment. Conventional loan options are available with as little as 3 percent down and loan assistance programs are also available. In fact, the typical down payment last year for first-time buyers was 7 percent. Overall, the typical down payment was 13 percent.
  • Older Americans who are benefiting from rising equity in their own properties, are increasingly a source of support for younger buyers. The NAR reported that 28 percent of first-time buyers got help toward their down payment from family or friends.

All that said, you may still need to tackle challenges in your local housing market to get into your first home. In high-demand markets like Northern Colorado, first-time buyers should:

Be persistent. Don’t get frustrated if you don’t strike a deal the first time you make an offer. Stay engaged with your REALTOR® and opportunities will most likely happen.

Be flexible. Don’t have your heart set on a house before you know if you’re able to secure a contract.

Be aware. Don’t be surprised if you need to bid well over asking price if you want to compete for a house in Northern Colorado.

REAL ESTATE BY NUMBERS

  • $9.4 million. Price paid by Amazon for a 152-acre development site near the Northern Colorado Regional Airport in Loveland. Amazon plans to build a new distribution center at the site.
  • 3.48 million. Square footage of the Amazon distribution center planned for east Loveland. According to approved plans, the structure will be 823,871 square feet on the first floor and about 664,750 square feet on each of four floors above that.
  • 5. Where the Fort Collins-Loveland area ranks nationally among the “Best Housing Markets for Growth and Stability, according to financial website SmartAsset. The Boulder-Longmont area ranks No. 2.
  • 101. Percentage of jobs that the Fort Collins-Loveland area has recovered since the start of the COVID-19 outbreak, based on Colorado Department of Labor and Employment data for February. Statewide, the recovery rate is 107 percent.
  • 2,338. Median square footage for a new single-family home in the United States in 2021, up 10 percent over 2020, according to the National Association of Homebuilders.
  • 46. Percentage of homes that are selling above list price across the United States, according to a report by the National Association of REALTORS®.
  • 8.2. Percentage of homes nationwide – approximately 6 million total – that are valued at $1 million or more, according to Redfin, a real estate services company.
  • $537,097. Purchase price for the former Larimer County Annex Building, 205 E. Sixth St. in downtown Loveland. New owners plan to convert the building into a 15-unit condominium project.
  • 390. Number of lodging units proposed for the Rocky Mountain Grand Resorts and Conference Center, a planned 25-acre project that would be in Loveland near the Northern Colorado Regional Airport.
  • 43. Where the Milken Institute ranked the Fort Collins-Loveland metro area among the country’s “Best Performing Cities” for economic resiliency in 2022. In all, 200 metros were ranked in the large-city category.
  • 3,317 feet. Lowest elevation in Colorado, located in Yuma County in the northeast corner of the state.
  • 37. Percentage of U.S. home buyers in 2020 who were part of the millennial generation – people born between 1981 and 1996 – representing the largest share of home buyers by age category.
  • 300. Approximate number of gallons of water used each day by an average American household, according to the U.S. Environmental Protection Agency.
  • 20. Percentage increase in median sales prices for vacation homes in December 2021 compared to December 2020, according to analysis by real estate service firm Redfin.
  • 3,026. Square footage for a proposed new Raising Canes drive-through restaurant at 1800 N. College Ave. The location is currently the site of North College Motors.
  • 336. Number of apartment units proposed for an 18.4-acre site at 2525 Erfert St. in north Longmont, near the Walmart discount store.
  • 3. Percentage of homes in the Denver area that sold for $100,000 or more above asking price between Jan. 1 and Feb. 15 this year, according to sales data analysis by Redfin. That ranks ninth among metro areas for that metric.
  • 38.2. Percentage growth for total housing units in Broomfield County between 2010 and 2020, which ranks No. 12 among all U.S. counties in housing growth for that period, based on analysis of U.S. Census data.

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