Home prices are up. Substantially.
Interest rates are rising. Somewhat slowly.
Inventories of homes available for sale continue to be stagnant by recent history standards.
So consumers can expect even more upward pressure on home prices as 2022 gets underway, but they can find places to buy if they’re serious about moving, said Brandon Wells, president and CEO of The Group Inc. real estate company, in his annual real estate forecast.
Wells and state demographer Elizabeth Garner teamed up on Wednesday to plot the course of Northern Colorado real estate, both in the recent past and looking into the future.
Homes are available to buy, but not in the same manner as the market permitted in previous years, Wells said in explaining what he termed the “myth” of a housing shortage.
He said that in past years, buyers would go online and find 30 or 40 homes that interested them. Then they’d whittle that list down to a half dozen and perhaps seek out a Realtor to show them a few. They’d negotiate, make an offer and wait for it to be accepted.
Now, he said, “the marketplace looks different because of the velocity of the market.” The available inventory might be three or four homes instead of 30, and sales are happening very rapidly.
But they are happening. The sheer number of sales of homes in 2021 was up over the prior two years. Nationally, 6.1 million homes sold in 2021, the highest number since 2006, he said. In Windsor, 323 more sales occurred last year than the year prior; Loveland saw 112 more sales last year; Fort Collins saw 110 more sales. The number of sales indicates that inventory was available to buy one way or another. Wells expects the number of homes sold in 2022 to be up 8% over 2021; on a national basis, the growth is expected to be 5%.
He acknowledged in an interview prior to the formal forecast event Wednesday night that some sectors “are constipated.” A year ago in Wells’ forecast, he said that older homeowners moving out of their family homes are key to permitting young homebuyers to enter the market, but those older homeowners aren’t selling because they’re having trouble finding replacement homes.
That remains the case, but he said Realtors are able to work “hand to hand” to get through the logjam; they sometimes are able to find properties that aren’t listed if they know what a buyer wants.
Wells said that home prices have escalated in double digits in the past year in virtually every community in Northern Colorado. Fort Collins saw the median detached home price increase to $535,000, up 17.3%. Loveland’s median rose to $450,000, up 13.9%. Greeley’s median rose 14.4% to $372,925.
Home appreciation — the value of a home over time — is also increasing. Wells said that in the Fort Collins/Loveland metropolitan statistical area, homes appreciated 14.4% in the first three quarters of 2021, the fourth-highest increase in the time the statistic has been tracked.
He expects it to be second-highest by the time the fourth quarter is added. Greeley’s home appreciation rate was 14.4% higher also, the highest in its history.
Other market trends
Wells said that development will continue to occur in the region but will be centered in an area between Johnstown, Greeley and Windsor. That’s because developers are seeking “water security and whether towns are metro district friendly.” That area meets those two criteria, with Greeley having water supplies sufficient for growth well into the future while being supportive of developers who need metro tax districts to make their projects work.
The region will also begin to see more “build-to-rent” neighborhoods as developers seek a long-term return on their investments. He cited two neighborhoods in particular: Kinston, a McWhinney Real Estate Services Inc. development in Loveland’s Centerra neighborhood, has one phase that will be build-to-rent instead of build-to-sell. Also, a Landmark Homes development in east Fort Collins will offer some build-to-rent products.
The Group expects rental rates to begin to escalate, with 7% to 15% increases already visible in the region. Rental rates held steady during the pandemic because of eviction moratoriums and concerns of landlords that tenants could be priced out of their homes. However, escalating costs of maintenance and repairs are forcing some landlords to bump up rents, Wells said.
Water availability will cause home prices to escalate, too. The recent moratorium on building permits in Severance caused by inability of its water-treatment partner, the North Weld County Water District, to treat and deliver additional quantities of water is “the tip of the iceberg,” Wells said. “I think you’re going to see less new construction, which is why we’re predicting higher median-price growth for existing homes.”
As she has multiple times recently, demographer Elizabeth Garner said that Colorado continues to grow, but at a slower rate. And nearly all of the growth is happening along the Front Range and not on the Western Slope or eastern plains.
Migration to the state is slowing, because population growth is slowing nationally.
“Labor is tight and will get tighter. Just wait,” she said.
In the last decade, the nation saw its population grow the slowest since the Great Depression. Colorado’s population growth during the past decade at 14.8% was twice the national growth rate of 7.4%, she said.
“We’re naturally slowing down because births are slowing,” she said. The peak number of births was in 2007.
That means that there will be fewer people to attend school, enroll in college, and buy homes as the cohort of children born now moves through the population.
The under-18 population — the people who will make up the workforce in coming years — is getting smaller. Weld County accounted for 43% of the total population growth of those under 18 years of age, but even that rate was lower than it had been, she said.
The demographer predicted that 2025 will be the peak year of job growth in Colorado, and by 2030 the state will experience a significant slowdown in job growth because there won’t be people to fill the jobs.
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