DESPITE MIXED ECONOMIC SIGNALS, REAL ESTATE STANDING STRONG
Remember the children’s book Inside Outside Upside Down? Sounds a little like the current state of the economy. With news of banks failing, employment booming, but inflation still on the march, what does it all mean for real estate?
We see four reasons to believe the housing market in Northern Colorado will be resilient this spring and summer, and why buyers and sellers should stay the course:
Seasonality matters. We’re entering the traditional buying season. With a relatively strong job market in Northern Colorado, people need to move or want to move. If you’re a seller, there will be buyers, and vice versa.
Attitude adjustments. People are adapting to higher mortgage rates. Rates for 30-year loans jumped last year from about 3 percent to 6 percent—plus, it caused many would-be buyers to back off. But the new rate reality has sunk in (remember, 6 percent is in line with the long-term average since over the past 25 years). Consumers realize they can’t keep life on hold when there are reasons to move, such as new jobs or changing families.
New construction homes are a relative bargain. When higher mortgage rates caused buyers to hit the pause button, homebuilders found themselves holding on to unexpected inventory. Consequently, builders have been offering mortgage rate buydowns and other incentives to attract business. One industry resource estimated that 75 percent of builders nationwide were offering buydowns early this year.
Pent up demand is out there. Just because homebuying slowed down, doesn’t mean there’s no longer interest in owning a home. If you’re in a reasonable position financially to buy a home now, don’t wait for the next wave of buyers to jump back into the market; you could find yourself in a bidding war over a limited supply of properties. And remember, if current interest rates come down just a little, you can always refinance to lower your monthly payment.
Call me to discuss the current real estate market.
TAX TALK: 2 SIDES TO YOUR NEXT PROPERTY TAX BILL
We have some good news, and we have some inevitable news.
First, the good news.
At an average rate of 0.51 percent, Colorado boasts the third-lowest property tax rate in the country, behind only Hawaii (0.28) and Alabama (0.41). Locally, average rates for Larimer County (0.65) and Weld County (0.64) are slightly higher, but still well below the national average of 0.99 percent.
Now, the inevitable news.
When the next property valuation notices reach your mailbox in early May, the value on your home—and the tax bill that comes with it—is bound to increase sharply. That’s because local county assessors are required to re-set values every two years. And the recent surge in property values that occurred during the state’s 2021-22 real estate frenzy will be reflected in the new assessment (based on June 30, 2022 values). Spikes in valuation will vary by local housing conditions, but estimates for the statewide average increase in valuation run between 25 percent and 35 percent.
Translated into dollars and cents, if you paid $3,000 on previous property taxes, you might see your bill increase by an additional $1,000 a year.
But that’s not the end of the story. There is a limited window for property owners to appeal their new valuation. Go to your county assessor’s website to find details about submitting an appeal on your valuation notice.
Call me to discuss your property valuation. I’m happy to help you determine if it’s appropriate for you to appeal.
WITH HIGHER RATES, MORTAGE INTEREST DEDUCTION BACK IN STYLE
If you were among the fortunate folks who snagged a home loan back in the days of 3 percent mortgage rates, then you might also have given little thought to itemizing your mortgage interest and property taxes on your latest tax returns. The standard household deduction, which increased significantly in 2018, probably has you covered.
But for those among you looking at interest rates in the territory of 7 percent, well ... get out your pencils, because those deductions can make a difference in your bottom line, and alleviate some of the impact of higher rates on your housing costs.
Here’s what we mean:
For a couple holding a $528,000 loan at 3.625 percent interest, their combined mortgage interest, state, and property taxes add up to about $24,000. The standard deduction for the 2022 tax year is $25,900. Probably not worth their effort to itemize.
For the same couple with the same loan at 6.875 percent, their mortgage interest, state, and property taxes will total about $45,000 or roughly $20,000 over the standard deduction. By itemizing that additional deduction, they would stand to reap about $5,000 annually – creating the effect of saving about $400 each month off their mortgage bill.*
Big picture. If you’re in the market for buying a home, but feeling nervous about current mortgage rates, be sure to factor in these deductions before you turn your back on the home of your dreams.
*This represents an estimate for the impact of the deduction, which can change based on your tax bracket. Be sure to contact your tax professional about your tax situation.
Call me and I’ll help you figure out what it might truly cost you to purchase a new home.
Earlier this year, we asked planning departments in several Northern Colorado communities about development trends and local priorities. In the first of a series, we feature responses from Windsor Director of Planning Scott Ballstadt. His comments were edited for length and clarity.
WINDSOR: AIMING FOR HOUSING DIVERSITY AND WATER CONSERVATION
What are your towns current priorities or focus areas of impact?
- Windsor’s 2016 Comprehensive Plan stresses the need to diversify housing types, and we’re currently updating and reaching out for public comments. Another area of focus is water conservation.
- Our Town Board will regularly monitor and adjust water policies as needed as we balance the water necessary for current development along with funding for future improvements associated with NISP (Northern Integrated Supply Project).
- We see trends toward smaller single-family lot sizes, resulting in higher density and lower water use.
What are your projects of note?
- Raindance (1,504 units) approaching buildout in five years instead of the predicted 10, Prairie Song (2,130 units), Overland (691 units) and Trevenna (262 units) are building out more typically and the Ridge at Harmony Road is about completed. There may be a brief lag time before Hartford Homes’ Prairie Song/Tacincala becomes part of the Town’s newest growth area.
How has residential development changed?
- Since 2016, Windsor has approved record numbers of multi-family dwelling units; 2022 was the first year that multi-family units (763) surpassed single family (496). Last year, it permitted 1,259 total dwelling units.
- We’re seeing more concepts for build-to-rent communities and developers are exploring how the concept fits with Windsor’s land use process.
- Windsor has intergovernmental agreements with both Loveland and Timnath; we collaborate on areas of shared interest such as The Brands. Windsor Housing Authority also partners with Loveland Housing Authority; LHA has been a great resource and partner in helping with workforce housing projects.
REAL ESTATE BY NUMBERS
- $6.85 million. Purchase price for the former Loveland Ford property at 999 E. Eisenhower Blvd. in Loveland. The site includes a 17,937-square-foot commercial building, as well as a 7,000-square-foot service garage.
- $492,000. Average total cost for building a new home across Colorado, including land and construction, according to a 2022 study from StorageCafe. That average listing price for a single-family home in Colorado, including existing homes, is $600,000.
- 640. Number of homes proposed for Union Park, a mixed-use development planned for southeast Fort Collins near the Front Range Village Shopping Center. The 33-acre site is located on Harmony Road between Corbett Drive and Ziegler Road. Project plans also call for about 40,000 square feet commercial space.
- 140,000. Retail square footage planned at Centerra South in east Loveland, proposed by McWhinney Real Estate Services Inc. The development also includes plans for an office building and 350 units of multifamily housing.
- $12.5 million. Amount that the Fort Collins City Council has authorized for the purchase of the former Hughes Stadium ground, a 165-acre site on the west side of Fort Collins. The city is under contract to buy the site from Colorado State University.
- $3.066 million. Price paid by owners of Fort Collins Nissan for a 1.1-acre property located at 5817 S. College Ave., near the Nissan dealership at 5811 S. College Ave. The purchase includes a 13,868-square- foot commercial building.
- 67.3 percent. Occupancy for hotels in the Greeley area during February, the highest rate in northern Front Range, according to the Colorado Hotel and Lodging Association. Statewide, the average occupancy in February was 62.9 percent. Steamboat Springs topped the state at 86.5 percent.
- $2.5 million. Sale price for the Dollar General building, located at 7590 Fifth St. in Wellington. The 9,100-square-foot retail building was constructed in 2021.