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REAL ESTATE INSIDER Vol. 46, No. 3 | APRIL 2022

MORTGAGE RATES UP, BUT IT’S NO REASON TO BE DOWN

After spending much of last year below the 3 percent threshold, average mortgage rates for 30-year fixed loans breached the 4 percent barrier in recent weeks – a trend that’s causing some real estate observers to grow a bit gloomy about the housing market.

If the headlines are giving you the heebie-jeebies, relax. Here’s a double dose of perspective to ease your anxiety:

First, today’s average rates (3.89 percent as of Feb. 24) remain very low by historical standards. And even with the latest hike, rates are roughly in the middle of the latest five-year range (remember, average rates reached 4.94 percent in November of 2018). And by all measures, the housing market performed rather well throughout the last five years.

Next, as mortgage rates and home prices increased, so have incomes – enough for many Americans to stay on pace with, or even ahead of, the mortgage math. Here’s a scenario:

2021. A household earning $6,000 a month qualifies for a $450,000 home. Their mortgage rate is 3.25 percent with a 20 percent down payment. Their monthly principal and interest payment is $1,567.

2022. The same house is up to $500,000, and the mortgage rate is 4 percent after a 20 percent down payment. The monthly payment is up to $1,910, or another $343 per month.

But if that same household’s income over the past year increased by at least 5 percent, their income growth covers nearly all of the higher monthly payment (Note: on average, private industry workers saw wages and salaries increase 5 percent in 2021, according to the U.S. Bureau of Labor Statistics).

Another factor easing the impact of higher interest rates is the overall access to credit. In the aftermath of the Great Recession in 2008-09, loan underwriting guidelines were strict, making it harder to borrow. But as the economy strengthened and loan delinquencies plummeted, lenders have softened underwriting rules to make it easier for more potential buyers to enter the market.

Call me to discuss if it makes sense for you to purchase a home this spring.

STACKING UP THE BENEFITS OF BUYING VS. RENTING

As home prices continued to increase last year in many parts of the United States, that trend has given rise to the argument that would-be homebuyers are better off renting today and putting ownership goals on hold.

Based on individual circumstances, or due to prices in certain communities, there may be reasons where that’s the case. But there’s much to consider before closing the door on home ownership.

First, a recent report from real estate analytics firm Attom Data Solutions, shows that owning was still more affordable than renting for most Americans in 2021. According to the study, which evaluated local rental rates, home sales statistics, and income data, Americans are better off buying in 58 percent of U.S. housing markets.

Even if home prices appear daunting where you want to live, there are more enduring reasons why ownership is more cost effective.

Appreciation. From year to year, it’s not easy to predict how your investment will grow. But real estate values in the U.S. have increased 5.5 percent annually on average over the past 50 years.

Pay yourself. Either way, shelter costs money. The rent check goes to your landlord. The mortgage check goes to your equity growth.

Predictability. A mortgage can lock in your monthly housing costs. Rents are subject to change. A study by real estate firm Redfin points out that rents increased 14 percent on average last year and are likely to grow another 10 percent in 2022.

Interest rates. While mortgage rates have gone up in recent months, they remain well below historical averages.

U.S. HOUSING MARKET VALUE SURPASSES $43 TRILLION

The U.S. housing market experienced its largest annual gain of 19.6 percent – a whopping $6.9 trillion in 2021, nearly doubling the previous largest annual gain of $3.7 trillion back in 2005.

According to a new Zillow analysis, the full U.S. housing stock is now worth $43.4 trillion. It’s noteworthy that the top one-third of most expensive homes accounts for more than 60 percent of the market’s total value.

In four states, the housing market surpassed the $1 trillion milestone. Colorado’s housing is now worth $1.2 trillion, North Carolina’s comes in at $1.1 trillion, and both Georgia’s and Arizona’s housing markets are each worth around $1 trillion. There are now 14 states with more than $1 trillion in housing value. California real estate is worth more than one-fifth – 21.3 percent – of the nation’s housing value and increased $1.4 trillion in 2021, for a total value of $9.2 trillion, which is more than the combined value of the bottom 30 states.

Colorado’s overall share of the U.S. market grew from 2.6 percent to 2.8 percent; New York lost more than any other state, falling from 7.8 percent in 2020 to 7.3 percent in 2021, although its total real estate value increased from $2.8 trillion in 2020 to $3.2 trillion in 2021.

REPORT: FORT COLLINS, GREELEY AMONG BEST PLACES TO LIVE IN COLORADO

People keep saying nice things about Northern Colorado.

This time the glowing remarks come from financial services website Bankrate.com, which ranks Fort Collins No. 1 and Greeley No. 4 among the best cities to live in Colorado.

This ranking reflects four key factors: affordability, the strength of the local job market, public safety, and overall health and well-being in the community. Note: For purposes of data analysis, the rankings look at metropolitan areas. Consequently, the Fort Collins covers all of Larimer County, and the Greeley ranking covers all of Weld County.

Fort Collins registers the highest marks for wellness, scoring 9 points on a scale of 10. Jobs and safety each scored 8/10, while affordability came in at 6/10. Greeley was stronger in affordability at 8/10, followed by safety at 7/10; job market and wellness each registered at 6/10.

In an accompanying article, Bankrate.com called Fort Collins “the ultimate place to enjoy the laidback culture of Colorado.” On Greeley, Bankerate.com the praised the evolution of its own cultural scene, with the development of the downtown Creative District and “an impressive collection of public art.”

Other cities in the top five included Denver, No. 2; Colorado Springs, No. 3, and Grand Junction, No. 5. Bankrate.com said it left Boulder off the list this year “due to high housing prices.”

HOT HOUSING MARKET BUILT ON COOL COLORADO LIFESTYLE

Sure, supply and demand are fundamental factors in any local housing market. We can all figure out supply – that’s just cold, hard math. But where does demand come from?

In Northern Colorado, it’s largely about lifestyle. People want to live here because of the physical beauty and recreational attractions that make it different from just about any place in the country to live, work and raise a family. It’s what keeps people coming and keeps home prices rising.

But thankfully, many of the great lifestyle opportunities here are relatively inexpensive, or even free – especially when the weather turns warm. Here’s a snapshot of what makes Northern Colorado cool this time of year.

If you’ve lived here long enough, you’ve probably got a favorite activity that makes you look forward to warmer weather – and makes you realize why you want to live here.

THE GROUP DIFFERENCE

THE GROUP PROVIDES IN-HOUSE SERVICES TO ENSURE YOUR HOME IS RECEIVING MAXIMUM EXPOSURE.

With the help of 2 professional video producers on our team, we have a variety of options to capture your home on video, highlighting its most spectacular features and raising the bar with marketing. These videos are displayed on Youtube.com, TheGroupInc.com, Zillow.com, and are available for social media advertising as well. View all of our videos by clicking HERE.

REAL ESTATE BY NUMBERS

  • $1.2 Trillion. Total value of residential housing in Colorado in 2021, according to a recent Zillow survey, or 2.8 percent of the total U.S. housing value.
  • 102,000. Square footage of the recent industrial expansion for Lightning eMotors in Loveland. The electric vehicle manufacturer’s facility now spans 226,000 square feet.
  • $775,100. Median home price in Boulder during the fourth quarter of 2021, making it the seventh-most expensive metro housing market in the U.S., according to the National Association of Realtors.
  • 27.8 percent. Year-over-year decline in new home lot inventory between the fourth quarter of 2020 and the fourth quarter of 2021, according to a report by Zonda Economics.
  • $7.6 million. Price that investors paid to buy a 46,000-square-foot industrial building at 2985 First Ave. in north Greeley. The building is currently occupied by a steel fabrication manufacturer.
  • 5.4.2022. Date that Air France will resume seasonal service between Denver International Airport and Paris with three weekly flights. The airline currently serves 11 destinations within the United States.
  • 43.3 percent. Occupancy rate for Colorado hotels in January, up from 40.3 percent in January 2021, according to the Colorado Hotel and Lodging Association.
  • 150,000. Square footage for the proposed addition to Colorado State University’s Powerhouse campus at 430 N. College Ave. If approved, the five-story project would be called Powerhouse III.
  • 37.6 percent. Decline in Colorado bankruptcy filings in January compared to January 2021. Colorado recorded 317 bankruptcy filings in January, down from 508 last January. Larimer County filings totaled 15, down from 20 last year. Weld County filings totaled 30, down from 38.
  • $8 million. Purchase price for a 171,725-square-foot commercial building at 2400 W. 29th St. in east Greeley. Colorado Premium Foods bought the property, previously Greeley Habitat for Humanity’s ReStore, with plans to make it new food processing facility.
  • 304. Number of apartments that McWhinney Real Estate Services Inc. is building in Greeley. The Lariat is under construction on a 12.4-acre site located between 38th and 42nd avenues.
  • 237. Acreage for the proposed Ledge Rock Center in Johnstown. The new development, which calls for 750,000 square feet of commercial space and about 1,200 housing units, is near the southeast corner of Interstate 25 and Colorado Highway 60.
  • $9.4 million. Price that the owners of the Texas-based Buc-ee’s retail chain paid for a 140-acre development lot in Johnstown. The future store will be located near the southwest corner of Interstate 25 and Colorado Highway 60.
  • $44 million. Price paid by New Jersey-based investors for the Poudre Valley Mobile Home Park, 2025 N. College Ave. in Fort Collins. The site spans about 39 acres and includes 344 housing units.
  • 336. Number of apartment units that an Indiana-based developer plans to build in north Longmont. The proposed Notch66 complex will be located at 2514 Main Street, near the intersection of Colorado Highway 66 and U.S. Highway 287.
  • $189.5 million. Price that South Carolina-based investors paid to buy two student-oriented housing developments in Boulder. The two projects total 282 apartment units.
  • 481. Number of cities in the U.S. in which the median home price is $1 million or more, according to Zillow.
  • 14 percent. Average increase in rental housing rates across the U.S. in 2021, according to a report by Redfin.

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