Northern Colorado Economic Snapshot - February '11

Real estate markets are often difficult to define. Homes may be selling well in one geographic area, but not another. Home values may be increasing in one price range, but declining in others. Inventory levels of available homes may be growing in one neighborhood, but diminishing in another. It can be tricky to get a true and accurate picture of what the overall market is doing at any one point in time.

There is an approach that does provide relevant information. It’s an “apples to apples” comparison. What took place in this specific area last month, last year or five years ago? What happened in sales activity, available listings and average prices? Of course, there are always variables to consider. What were mortgage interest rates at the time? How was the economy doing? Was the government providing a buyer assistance program? Did it snow everyday?

In January/2011, the Northern Colorado (Ft. Collins, Greeley, Loveland & Windsor) real estate market was up approximately 4% in single family home sales and up 47% in attached unit sales when compared to January/2010. The average single family home sales value was up approximately 16%; the average attached unit sales value was up approximately 19%.

Here are some things to digest as we venture down this precarious real estate path the rest of 2011.

1. Mortgage Interest Rates: Back in the late 1980’s and early 1990’s, home buyers would have literally killed to get a thirty-year fixed rate loan for 4.75%. It would have felt like they were stealing money from the banks. They would have been lined-up for blocks; drooling on themselves. In today’s economic climate 4.75% doesn’t generate the same level of enthusiasm. It’s nice, but it doesn’t get home buyers salivating. Mortgage interest rates have risen slightly over the course of the past few months. If the housing market rights itself, look for interest rates to continue this pattern.

2. Available Inventory: That black cloud perched on the horizon is composed of bank foreclosures, short sales and HUD properties. It’s unclear how many of those little devils are out there. They keep popping their heads-up. In the past couple of years many of them have been purchased by savvy investors, first-time homebuyers or, on a more limited basis, buyers looking to take advantage of a price sensitive marketplace and make a move-up. Lack of inventory creates motivation in the mind of buyers. Unfortunately, high inventory levels of available properties have been the norm the past few years.

3. Balanced Real Estate Market: Before a declining real estate market can recover it must reach a plateau. It must halt its negative momentum and begin the process of turning itself around. Real estate markets move slowly. They are a perception based entity. Do buyers view the market improving or continuing to weaken? Do homeowners glimpse an opportunity to sell now or are they hoping for the market to bounce back? A healthy real estate market is always one that is balanced; a relatively equal number of motivated buyers and realistic sellers.

4. Residential Home Values: Finally, for a plateau to exist there needs to be stabilization in market values. For Northern Colorado, the average residential property sold in January/2011 for $229,696; for January/2010 that number was $200,140; for January/2005 (the year when Northern Colorado sales activity peaked) the average residential property sold for $248,732.

Market data statistics are from IRES the Northern Colorado MLS.